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.
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Finance: What is a Selling Syndicate?6 Views
finance a la shmoop. what is a selling syndicate? it's good thing we don't have
a lisp - well it's just group of salespeople who work together as a team [money with definitions printed on it]
in a few structured ways. that's about it. but calling it a whispery syndicate .ooh
that sounds kind of mobish doesn't it? well in a selling syndicate there are a
series of documents and contractual sales agreements that get negotiated [flow chart]
among the key players. they're cleverly titled syndicate letters or agreements
among underwriters -and see that underwriter there that's like the people
who take a company public and why do you need a syndicate. well you got a sell to
a whole bunch of buy side people so that the stock floats and a lot of shares
trade and make it liquid .see that's how that works that's why you need a
syndicate. and they're basically two types of syndicate :a western-type which
means more or less every person for themselves which basically means just [definitions displayed]
sell the IPO shares Mortimer, sell them! a Western account holder essentially buys
the shares they're given to sell like the syndicate buys them from the issuing
company and then turns around and sells them to mutual funds and hedge funds and
you know Bernie from the investment club. if the Western syndicate can't sell
those shares well they eat them they own them that's it .it's done. an Eastern
syndicate or Eastern account runs more as a forced partnership. Eastern account
syndicates require that members sell not only their own allotment but also the
amount that is not sold by other syndicate members. meaning they have to
sell the West Coast stuff along with the east coast stuff if that was an issue. got [map of the U.S.]
it ? it's all about teamwork, and all that stuff. and there you go. you now know a
thing or two about the wild world of selling syndicates. so yeah forget about
Biggie and 2pac .this is the real East versus West feud worth beefing over [2 men grimace at each other]