What Does "When Issued" Mean?

When issued (WI) is a transaction that is made conditionally because a security has been authorized but not yet issued. Treasury securities, stock splits, and new issues of stocks and bonds are all traded on a when-issued basis.

Prior to a new issue's offering, underwriters solicit potential investors who may elect to book an order to purchase a portion of the new issue.

Understanding When Issued

When-issued orders are made conditionally because they may not be completed, particularly in the event the offering is canceled. Orders, when issued, are sometimes called orders "with ice" or orders "when distributed." The term is short for "when, as, and if issued." Securities trade on a when-issued basis when they have been announced but not yet issued. The transaction is settled only after the security has been issued. A when-issued market exists where when-issued instruments are traded.

When-issued markets can provide an indication regarding the level of interest that a new issue may attract from investors. When-issued transactions are dependent upon the actual security being issued and the exchange or National Association of Securities Dealers ruling that the transaction is settled.

Example of When Issued

An industrial conglomerate wants to spin off its chemicals division due to its drag on earnings and low margins. In order to effectuate the spinoff, the conglomerate plans to pay its shareholders a dividend in the form of stock of the new chemicals divisions company.

After the record date—the date on which holders of the conglomerate's stock are entitled to receive stock in the spinoff—the conglomerate's shareholders can effectively begin trading the right to receive shares in the spinoff on a when-issued basis. Those shareholders who buy the rights but do not hold shares of the conglomerate on the distribution date, the date in which the actual shares in the spinoff are issued and begin trading, receive their shares in the spinoff, and the when-issued market ceases.

Benefits of When Issued

When issued sheds light on the demand for securities and can, therefore, attract investors who would otherwise sit out the bidding process for the securities for fear of a volatile market. Thus, when issued can decrease volatility when the securities are actually issued because investors have confidence in the level of demand for the securities in question.

When issued helps develop the market for a new security by attracting investors, and it also offers investors liquidity prior to the actual distribution of the securities in question, allowing them to monetize financial assets more readily.