Break Issue

Occurs when a stock trades below its initial public offering (IPO) price shortly after becoming publicly traded.

CR7 Corp., a private men’s hair gel company, decided to sell stock to the public to finance its plans to expand into the eyebrow wax market. Unfortunately, CR7’s CFO was extremely overconfident in his estimate of how much the market would value his firm’s offering, and insisted on setting an IPO price of (a perfect) $10.

Shortly after the opening bell, shares broke issue, trading as low as $2 per share. Eventually, a private equity firm, Messi, Inc., bought all outstanding shares for $3 per share, taking over ownership of CR7.