What is ‘Eating Stock’
The forced purchase of a security when there are insufficient buyers. Eating stock often applies to underwriters of an initial public offering (IPO), if a certain level of subscription is guaranteed but is not met. This allows the company going public to have a better approximation for the amount of capital it will raise from the offering.
Explaining ‘Eating Stock’
Underwriters mitigate the risk associated with eating stock, in IPOs that it offers, by charging a substantial underwriting fee. Eating stock does not mean that the underwriter will take a loss on the entire venture, as the underwriting fee may exceed the cost of shares that it was forced to absorb.
Further Reading
- Finance in economic growth: Eating the family cow – papers.ssrn.com [PDF]
- Finance and Intangibles in American Economic Growth: Eating the Family Cow – www.tandfonline.com [PDF]
- Identifying innovative interventions to promote healthy eating using consumption-oriented food supply chain analysis – www.tandfonline.com [PDF]
- Trying to have your cake and eating it: how and why the state system has created offshore – academic.oup.com [PDF]
- Institutional investors and the Monday effect on tourism stocks – www.sciencedirect.com [PDF]
- Risk and volatility: Econometric models and financial practice – pubs.aeaweb.org [PDF]
- Food Rx: a community–university partnership to prescribe healthy eating on the South Side of Chicago – www.tandfonline.com [PDF]
- Optimally eating a stochastic cake: a recursive utility approach – www.sciencedirect.com [PDF]
