The process of bringing shares to the market for the first time is called an initial public offering (IPO), a new offering or a new issue. The investment dealer that helps bring the new securities to market is the underwriter.
The company and the underwriter determine the details of the offering such as type and price. Special features attractive to investors are designed. A few weeks before the offering, the company must register a preliminary prospectus with the securities administrator in each province where the offering will be sold. This is a lengthy document describing the company, its history and officers, and information on the offering. It can be used to solicit investor interest in the stocks. The preliminary prospectus is checked by the securities administrators to ensure all important details are disclosed. But even if the securities administrators approve a prospectus, this does not mean that the stocks are a good investment. The administrators don't endorse the securities nor do they vouch for the accuracy of the information in the prospectus. They simply try to ensure that all important information about the company and the shares is made public.
Sometimes, a new issue can be sold without a prospectus if it's being sold only to big investors. These investors are called exempt purchasers and are mostly financial institutions.
If you are looking at a new issue, be sure you or your advisor reviews the preliminary prospectus. The final version of the prospectus is filed just before the shares are distributed. This is where you will see the final share price instead of only a price range.
The company and the investment dealer then work out what role the dealer will play in distributing the issue. A dealer can buy the whole issue, either alone or as a part of a group called a banking group. This situation is called a bought deal, and the dealer will resell the shares to investors or put them in the firm's inventory. The dealer can also act as an agent, simply locating investors who might want to buy the shares from the company. This is called a best efforts underwriting. Even though there is risk involved, most issuers prefer a bought deal underwriting because they are guaranteed a certain amount of money and don't need to take back any shares that aren't sold.