Breaking The Syndicate

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Definition: Breaking The Syndicate


Breaking The Syndicate

Quick Summary of Breaking The Syndicate


Terminating a syndicate, enabling members to sell their remaining holdings without price restrictions.




Full Definition of Breaking The Syndicate


The term “breaking the syndicate” or “breaking syndicate” refers to the dissolution of a syndicate formed by a group of investment bankers to underwrite – or price, market, and sell – the issue of a specific security. Prior to the agreement’s termination, the underwriters must sell the securities at the offering price. The syndicate usually ends 30 days after the sale date, but it can be terminated sooner if the participants agree.

Syndicates are usually broken up for one of two reasons:

  • the issue was successfully distributed; or
  • the underwriters were unable to place the securities at the offer price.

If the syndication is dissolved within 30 days of the security sale date, group members are free to sell any remaining holdings without regard to the original price restrictions.

The dissolution of a syndicate also frees up underwriters to trade securities on the secondary market.

Underwriting Syndicates

When a particular securities issue is too large for a single underwriter to handle, a group of underwriters will form a syndicate for the time being. This is due to the fact that underwriters are typically required to purchase shares or equity from the issuing company before selling them to investors. Underwriting syndicates are commonly used to help bring initial public offerings (IPOs) to market.

Syndicates benefit everyone because they allow companies to bring large issues of stock to the market while allowing investment banks to reduce their own risk in underwriting the issue by sharing it with other institutions. Securities underwriters run the risk of being stuck with securities they can’t sell because they are required to hold any securities that aren’t sold in an IPO or other offering. Syndication spreads this risk among several underwriters. Meanwhile, the issuer of the securities gains access to a large influx of cash, as well as the underwriting syndicates’ sales channels, contacts, and some level of market risk insulation, because the underwriter absorbs losses if the issued security fails to sell.

Members of a syndicate will typically sign a contract outlining the terms of the syndication, including how much stock is allotted to each underwriter, as well as other rights and obligations specific to each member. A lead underwriter will be appointed to lead the syndicate as a whole. This organisation allocates shares, determines the offering price, plans the timing of the offering, and ensures that the syndicate complies with Financial Industry Regulatory Authority (FINRA) and Securities and Exchange Commission (SEC) regulations. If necessary, the lead underwriter may also deal with the SEC and FINRA.


Synonyms For Breaking The Syndicate


Breaking The Syndicate


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Definition Sources


Definitions for Breaking The Syndicate are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 25th January, 2022 | 0 Views.