“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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Finance: What is a Takedown?7 Views
finance a la shmoop what is a takedown well it's basically a commission or a [The definition of takedown]
spread that investment bankers um take down from the proceeds raised on a
securities offering ie an IPO well specifically that takers
down are called the syndicate and we wish we could tell you that with [People playing cards and smoking]
something mob-related but that's just a group of stock brokers who generally
sell to institutional accounts like mutual funds hedge funds and a big fat
family set of offices yeah like wealthy people's offices yeah at its essence the [Pile of cash]
take down is the gross profit that each syndicate member makes after the
placement of the securities after wire fees and other basic transactional costs
are covered such as the sellers of the securities get their dough whatever [The words 'illustrative example time' fall out of a piggy bank]
dot-com is selling 10 million shares of 20 bucks a pop the syndicate buys them
for 19 bucks each five minutes before placing them or selling them to the buy [Definition of the buy side]
side so there's a $1 spread in this placement and in most cases the lead
underwriter gets some percentage of the gross spread off the top to cover the [Calculation of the underwriter commission]
zillion dollars they spent on expensive lawyers and other bureaucrats being
certain that the securities offering complied with the you know 742 laws all ['The Big Book of 742 Laws' appears]
deriven from the 1933 and then 34 acts so if the lead banker gets a say a 15
percent override well then 85 cents net is left over for the takedown to be
distributed among the selling members of the syndicate and if any of those [Money being moved to the syndicate]
selling members feels they've been cheated well get ready to see one of [People stand up angrily in a board room]
these take down in this corner accountant wearing glasses 132 pounds so [Two men wearing boxing gloves ready to fight]
yeah pale-skinned alright sorry pal pick the right career [Guy is punched and knocked down]
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