Reallowance

  

Categories: Company Management

“Reallowance” is what happens when our kid tries to convince us we didn’t give them their allowance yet, and should therefore give it to them again.

Actually, that’s not true. Reallowance is less about doing chores and more about selling shares, though both involve paying someone to do stuff. In reality, “reallowance” is the money paid by securities underwriters to the outside securities firms that sell the stocks they’ve underwritten. It doesn’t happen all the time, but it does happen if underwriters are trying to drum up interest around a particular stock or mutual fund.

Let’s say Food Mutant, Inc., a company that sells kits to genetically modify our own food at home, has just gone public, and we as underwriters aren’t sure how the market is going to feel about the whole thing. So we contract with an outside brokerage, promising to pay them a fee—usually a percentage of the sale—if they can sell Mutant Food shares to their clients. That fee is called a reallowance, and the hope is that the added financial incentive to brokers will push them to push the security.

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taking your company public well then you need one of these guys and yeah if [Woman writing at a desk]

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things go poorly well then you may need one of these guys but if things go well [Gravestone]

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company to that world you know hedge funds mutual funds private wealthy [List of benefits that come with an underwriter]

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investors such that they are the you know financial wind beneath your wings [Skyscraper flying away]

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for a brief moment in time the underwriter usually an investment bank

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like the vaunted Goldman Sachs or Morgan Stanley or JP Morgan or UBS or Sumitomo

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announcement he'll see in the digital paper is usually in the shape of a

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tombstone announcing everything why a tombstone well because it represents the

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