What is ‘Re-Offer Price’
The term “re-offer price” refers to the price at which a financial institution offers a security that it has previously purchased. Re-offer price differs from the original purchase offer price, as it takes into account any accrued interest or changes in market value.
When determining the re-offer price, financial institutions consider a variety of factors including current market conditions, demand for the security, and the length of time since it was first purchased.
The re-offer price is typically slightly higher than the original purchase price in order to account for these factors and generate profit for the institution. Understanding re-offer prices is important for investors looking to buy or sell securities, as it can affect their potential returns on investment.
Explaining ‘Re-Offer Price’
An underwriting investment bank may facilitate a debt issue by agreeing to purchase all of the bond issue for a price below face value. Having the underwriters purchase the bond issue, instead of passing the sale onto the public, removes the company’s risk of not selling the entire issue. The investment banker will re-offer the bonds to secondary market at a different price, which may be higher price (premium) slightly below (discount) par value. In a serial issue, most common to municipal GO bonds, the first bonds to mature are frequently at a premium with a higher coupon rate. The last bonds to mature in re-offer price are sometimes sold at a discount, but carry a lower coupon rate.
Bond reoffer price
When a bond is reoffered to investors, the price may be higher or lower than its original offering. A bond’s reoffer price reflects its current market value, taking into account changes in interest rates and other factors. If interest rates have increased since the original offering, the bond’s resale price may be lower because it offers a lower rate of return.
On the other hand, if interest rates have decreased, the bond’s re offer price may be higher because it offers a more attractive rate of return. It is important for investors to stay up to date on changes in the bond market, as this can affect the re-offer price and their potential profits from buying and selling bonds.
Further Reading
- Negotiation and the IPO offer price: A comparison of integer vs. non-integer IPOs – www.jstor.org [PDF]
- The impact of pricing mechanism reform on underpricing of initial public offerings in China – www.tandfonline.com [PDF]
- IPO underpricing in Italy – www.tandfonline.com [PDF]
- The market performance of Italian IPOs in the long-run – papers.ssrn.com [PDF]
- Practices of system security pricing – ieeexplore.ieee.org [PDF]
