Syndicate Bid

See: Syndicate.

Members of a syndicate act as a group, a pack of financial wolves. But...the friendly kind.

Whatever.com went public in an IPO 6 months and change ago. Now there are 18 million shares that want to be sold from insiders in a stock, which trades only 3 million or so a day on average. So the sale of those shares gets coordinated by a bank or three, who chit-chat with investors via their sales and capital markets groups, and get a sense for volume demand at a price.

Like...if the stock is trading at $50, a "fair market clearing" bid might be something like $47.20. The syndicate, seeking to get their dime or three a share in commission for brokering this deal, will need to put some skin in the game. In fact, they'll have to comprise a fair amount of the buying volume themselves. They can buy some (or even all) of it at times, depending on the deal.

So think about this from an ethical perspective. The structure puts the company's insiders' brokers at odds, acting (almost by definition) against the best interests of their clients. Meaning...why not be all grim-faced and despondent, and tell them that, with that many shares for sale, they'll be lucky to get $42. When it turns out that the entire market absorbs those 18 million shares freely and quickly, and the stock pops back to about the same $50 it was trading before the secondary, the bank that bought those shares just made 8 bucks a share in spread times 18 million shares. Yeah, good work if you can get it.

In fact, all kinds of gates and disclosures are put in place to avoid this type of situation, but it's a force out there in syndicate bids when big volumes are being sloshed back and forth. So, um, you know...Caveat Shmooptor.