A type of follow-on offering where a company that is already publicly traded registers stock to be sold by existing shareholders to the public via an underwritten offering. Also used to describe the shares themselves: Secondary shares are sold by existing owners, whereas primary shares are issued by the company and raise new capital.

Selling Group

Members of the selling group are brokerages and other institutions that help the underwriting syndicate sell shares. Today, the term "selling group" is a bit of a misnomer because the manager and co-managers reserve the actual selling of IPO shares (and the accompanying fees) to themselves. Selling group members are usually listed on the prospectus but get only a small portion of the fees from the offering. While they do not underwrite any securities, the selling group members do share some legal and financial risks of the underwriting. The term selling group can sometimes refer to all of the institutions involved with placing IPO shares.

Selling Shareholders

These are the shareholders of the IPO who are selling shares at the time of the offering. The front cover of the prospectus indicates the total amount of shares being offered. The identities and breakdown of shares sold are detailed within the prospectus. The prospectus will also indicate whether shareholders will be selling on the Green Shoe. Investors should be skeptical of any IPO in which shareholders are selling large amounts of stock. Always ask the question "Why are they selling when they want me to buy?"

Sell side

Term used to describe the investment banking, equity research, institutional sales, and retail brokerage divisions of securities firms. Referred to as the sell side because of the sales functions these departments take on in the underwriting process and as trading commission generators.

Shelf offering

Also called a shelf registration, this allows an issuer to sell a variety of securities (debt, equity, warrants) at any time over a two to three year period, provided that they meet certain criteria. When issuers decide to take securities off the shelf and sell them ("takedown"), they can use an underwriter or other selling agent, or sell directly to investors. Despite their greater flexibility and lower costs, shelf offerings are far less common than follow-on offerings. Investors value the due diligence provided by banks in an underwritten offering. Meanwhile, the uncertainty of having registered shares sitting on the shelf creates an overhang that many investors avoid.

Short Sale

A tactic used when an investor expects a company’s shares to decline in price. The investor borrows shares from an entity that owns the shares and sells them on the market. In return, the lender is entitled to interest on the shares borrowed and a return of the shares. A position is considered closed out when the investor buys back the shares and returns them to the original owner. This is known as covering. IPOs can create opportunities for a short sale as they are untested in public markets and generally more volatile. However, you should expect higher borrowing costs given the volatility and relatively lower float.

Short Interest

The percentage of a company’s publicly traded shares that have been sold short and have not been purchased and returned to the original owners. Sometimes seen as a proxy for positive or negative sentiment about a stock. In many instances, IPOs have low outstanding floats which makes borrowing shares difficult and expensive. An implication of this is that IPOs can trade at valuations well outside the range of comparable public peers.

Short Squeeze

A situation that occurs when those with short interest are forced to buy back their shares and close out their short positions because of strong buying pressure. The additional buying compounds, causing the stock shoot up further.

Shotgun Investing

Refers to the tactic of making diversified investments within a young industry or sector in which market leadership is unclear. The idea is to identify and gain exposure to potential market leaders at reasonable prices. As a leadership hierarchy comes into focus, investors then peel off positions in marginal entities and consolidate their investments in the strongest players.

Smart Money

These are experienced and big investors that are well integrated into the Wall Street information flow and tend to be ahead of the market in anticipating budding trends.


Acronym for Special Purpose Acquisition Company. Synonymous with Blank Check Company.


When a company sells a portion or all of a division or subsidiary to the public in the form of an IPO, they are doing a spin-off. Parent companies do spin-offs for several reasons. First, to raise capital. The parent may be highly leveraged and need to pay down debt. Second, to rationalize its operations by selling off a non-core business. In this type of spin-off, the managers of the newly public company are (or should be) incentivized to perform well by stock in the new spin-off. Finally, a parent may decide to spin-off a division in an attempt to create shareholder value by drawing attention to a business segment that would command a higher valuation multiple as a standalone business than it does as a part of the parent.

Stabilizing Bid

After the IPO begins trading, the lead manager may decide that the members of the syndicate need to provide a stabilizing bid to ensure that the IPO doesn’t break issue and fall below its offer price.


Institutional investors usually make indications of interest that are several times larger than what they really want, hoping to get a reasonable allocation. While this strategy works most of the time, sometimes the order book doesn’t build the way the lead manager hopes. At this point, the lead manager can cut the price of the offering to generate demand, cut the size of the offering, or give the institutional investors all the stock they requested. This is called "getting stuffed". Institutional investors who get stuffed usually think there is something wrong with the stock and sell, putting pressure on the stock price and confirming that the deal was a dud.


This is the group of underwriters who have the responsibility for selling the IPO to the general public. A syndicate can consist of two managers for a small IPO and ten or more managers for a large multi-tranche offering. A syndicate might include underwriters who specialize in institutional business as well as retail-oriented firms. Syndicates once had a legitimate selling function. Today, the lead manager usually does most of the selling, supported by the other bookrunners. The co-managers just share in the risk of underwriting the IPO.