A B C D E-F G H I-J K-L M-N O P Q R S T U V-Z

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Selling Group
Members of the selling group are part of the syndicate, the group of underwriters formed to underwrite an IPO. Today, the term "selling group" is a bit of a misnomer because these underwriters usually get no actual shares to sell. The manager and co-managers reserve the actual selling of IPO shares (and the accompanying fees) to themselves. Selling group members are usually listed on the prospectus because they performed prior services to the company going public and get only a small portion of the fees from the offering. However, selling group members do share legal and financial risks of the underwriting.

Selling Shareholders
These are the shareholders of the IPO who are selling shares at the time of the offering. The front cover of the prospectus indicates the total amount of shares being offered. The identities and breakdown of shares sold are detailed within the prospectus. The prospectus will also indicate whether shareholders will be selling on the Green Shoe. Investors should be skeptical of any IPO in which shareholders are selling large amounts of stock.

Short-term investor
A person who invests in a stock with the intent of selling that stock on an immediate or short-term basis.

Spinning
A little talked about subject until the Wall Street Journal wrote an article describing how some investment banks favored certain clients with IPO shares in the hope of getting future investment banking business. For example, the CEO of a privately held Silicon Valley software firm who has an account with XYZ Securities might find that he or she was the recipient of a tidy profit from several thousand shares of a particularly hot issue that was bought and sold on the same day.

Spin-off
When a company sells a portion or all of a division to the public in the form of an IPO they are doing a spin-off. The parent company would do a spin-off for several reasons. First, to raise capital. The parent may be highly leveraged. Second, to rationalize its operations by selling off a non-core business. In this type of spin-off the managers of the newly public company are (or should be) incentivized to perform well by holding stock in the new company. Finally, a parent may decide to spin-off a division in order to draw attention to the newly independent entity and perhaps to raise the stock price of the parent.

Stabilization
After the IPO begins trading, the lead manager may decide that the members of the syndicate need to support the stock price with aftermarket purchases, and they make a stabilizing bid to ensure that the IPO doesn't fall below its offer price.

Story Stock
When a company has no earnings or perhaps no revenues, but generates interest because management weaves a good story, it is called a story stock. Because virtually all Internet IPOs have no earnings, they would technically fall under this definition. However, this term has not been applied to Internet companies.

Stuffed
Institutional investors usually make indications of interest that are several times larger than what they really want, hoping to end up with a reasonable allocation. While this strategy works most of the time, sometimes the order book doesn't build the way the lead manager hopes. At this point, the lead manager can cut the price of the offering, which might increase demand, cut the size of the offering, or give the institutional investors all the stock they requested. This is getting stuffed. Institutional investors who get stuffed usually think there is something wrong with the stock and sell.

Syndicate
This is the group of underwriters formed to underwrite an IPO. A syndicate might include underwriters who specialize in institutional business as well as retail-oriented firms. Syndicates once had a legitimate selling function. Today, the lead manager and co-managers usually do all of the selling. The syndicate members just share in the risk of underwriting the IPO.

 

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