What Does "When Issued" Mean?

"When issued" is a term that is utilized in investment circles to refer to situations that involve securities that have been announced to potential investors, but have not yet been made readily available for sale to those investors. When this is the case, the security has been approved for trading in the marketplace, and in fact may already be in active trading in anticipation of the release of the new issue. The general idea is that when the recently authorized security is actually issued, everything will be in order for investors to exercise their options, complete the transactions to buy the shares, and be able to make use of the security in any manner they see fit.

In reality, the use of the term "when issued" is really shorthand for a slightly longer designation that is known as "when as and if issued." As the name implies, the ability to actually gain control of the shares will commence only once and if the shares are finally issued. It is important to note that just because an issue of a security has been planned, approved and is capable of being traded in a market, the issuing company does not give up option of delaying or even canceling the issue. For this reason, investors tend to consider securities that are scheduled to undergo a split, or even completely new issues to not be a done deal until that issue is active and considered fully and completely issued.

Since a when issued security is not yet made readily available, the process for determining the unit price is often a little different from other issues that are already established in the market. This is because the coupon rate associated with the new issue cannot be readily determined until after the issue is complete. For this reason, the yield basis projected for the when issued security will often play a role in determining the pricing level that interested investors are willing to use as part of the transaction process, making it possible to identify a likely price that will apply on the date that the issue process is fully completed.

It is not unusual for investors who want to get in at the beginning of a securities issue to initiate transactions involving when issued securities. Depending on the degree of interest generated in the new issue, some investors may even be able to buy shares ahead of time, hold them in anticipation of the actual issue date, then sell them for a profit shortly after the issue is complete. There are even instances of some investors making money by purchase the when issued securities early on, and selling them just before the announced issue date and earning a return, based on the amount of excitement that the new issue has created in the marketplace.