Definition of When Issued
“When Issued” (WI) is a term used in financial markets to describe transactions that are made conditionally based on the understanding that a security has been authorized but not yet issued. This term is commonly applied to new issues of stocks and bonds, stock splits, and U.S. Treasury securities, which are traded on a when-issued basis until they are actually distributed or made available to the public. In financial news listings, a “WI” notation next to a price indicates that the security is being traded on a “when, as, and if issued” basis.
Examples of When Issued Securities
- New Stock Issues: When a company announces the issuance of new shares, these shares can be traded on a when-issued basis before the actual issuance.
- Stock Splits: Companies that declare a stock split may have the new, split-adjusted shares traded on a when-issued basis until they are officially distributed.
- U.S. Treasury Securities: Treasury securities, such as Treasury bonds and notes, which are auctioned but not yet delivered to the buyers, can be traded on a when-issued basis.
Frequently Asked Questions (FAQs)
What does WI mean next to a stock price?
“WI” stands for “When Issued,” indicating that the security is being traded conditionally based on its future issuance.
Are when-issued transactions final?
No, when-issued transactions are conditional and become final only if and when the security is actually issued.
Can the price of a when-issued security change?
Yes, the price of a when-issued security can fluctuate based on the market’s perception and expectations, similar to regular securities.
What happens if a security fails to be issued?
If a security fails to be issued, the when-issued transactions are canceled, and no actual trading occurs.
Who can trade when-issued securities?
Generally, institutional investors and experienced traders engage in when-issued trading due to the risks and complexities involved.
- Initial Public Offering (IPO): The process by which a private company offers its shares to the public for the first time.
- Stock Split: An action taken by a company to divide its existing shares into multiple shares, thereby increasing the number of shares outstanding.
- Treasury Securities: Debt instruments issued by the U.S. Department of the Treasury to finance government spending.
Online References
Suggested Books for Further Studies
- “Investment Valuation: Tools and Techniques for Determining the Value of Any Asset” by Aswath Damodaran
- “Security Analysis” by Benjamin Graham and David L. Dodd
- “Financial Markets and Institutions” by Frederic S. Mishkin and Stanley G. Eakins
Fundamentals of When Issued: Finance Basics Quiz
### What does WI stand for in financial markets?
- [ ] Wishes Initiated
- [x] When Issued
- [ ] Withdrawal Initiated
- [ ] Wealth Increased
> **Explanation:** WI stands for "When Issued," indicating a security transaction that is conditional on a future issuance.
### Can when-issued securities be legally traded before issuance?
- [ ] No
- [x] Yes, conditionally
- [ ] Only by government entities
- [ ] No, they are only theoretical
> **Explanation:** When-issued securities can be traded conditionally before their official issuance, meaning transactions are contingent on the actual issuance.
### Who typically engages in when-issued trading?
- [ ] Amateur day traders
- [ ] Retail investors
- [x] Institutional investors and experienced traders
- [ ] New market entrants
> **Explanation:** Institutional investors and experienced traders usually engage in when-issued trading due to the risks and complexities involved.
### What happens if a security traded on a when-issued basis is not issued?
- [ ] The transactions proceed as scheduled
- [ ] Traders receive alternative securities
- [ ] Traders incur fines
- [x] The when-issued transactions are canceled
> **Explanation:** If a security is not issued, the transactions made on a when-issued basis are canceled, and no actual trading occurs.
### Which of the following is an example of a when-issued security?
- [ ] A matured bond
- [x] A newly announced stock issue
- [ ] A delisted stock
- [ ] A fully distributed bond
> **Explanation:** A newly announced stock issue that has not yet been distributed can be traded on a when-issued basis.
### What marks the completion of a when-issued transaction?
- [x] The actual issuance of the security
- [ ] The announcement date
- [ ] Regulatory approval
- [ ] The halt in trading
> **Explanation:** The completion of a when-issued transaction occurs when the security is actually issued.
### In a news listing, what does the notation "WI" indicate?
- [ ] The security has matured
- [x] The security is traded on a when-issued basis
- [ ] The security is delisted
- [ ] The security is fully distributed
> **Explanation:** The "WI" notation in news listings indicates that the security is being traded on a when-issued basis.
### Are when-issued transactions considered speculative?
- [x] Yes, due to the uncertainty of issuance
- [ ] No, they are risk-free
- [ ] Only for Treasury securities
- [ ] No, they are fully guaranteed
> **Explanation:** When-issued transactions are considered speculative because they are contingent on the issuance of the security, which carries inherent risks.
### Which agency often deals with when-issued U.S. Treasury securities?
- [ ] Federal Reserve Bank
- [ ] The White House
- [ ] Nonprofit organizations
- [x] U.S. Department of the Treasury
> **Explanation:** The U.S. Department of the Treasury often deals with when-issued securities, such as Treasury bonds and notes.
### Can when-issued stocks affect the actual listed price upon issuance?
- [x] Yes, due to pre-issuance trading
- [ ] No, prices are set independently
- [ ] Only in rare cases
- [ ] Not for ordinary stocks
> **Explanation:** Yes, the trading activity in when-issued stocks can influence the actual listed price when the securities are officially issued.
Thank you for exploring the intricate world of when-issued securities and testing your understanding with our quiz. Continue to expand your financial knowledge for better investment acumen!
