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Investopedia explains 'Absorbed'
1. For example, if a peanut butter company's cost for peanuts increases from 50 cents per jar to $1.00 per jar but the company keeps the cost of one jar at $3 instead of raising it to $3.50, it has absorbed the increase in peanut prices.
2. There are several basic types of agreements underwriters can make to sell the issuing company’s stock. In a best efforts agreement, the underwriter is not responsible for any unsold shares and they revert to the issuer. In a bought deal, the underwriter agrees to buy all the shares and must resell them to recoup its investment. In a standby agreement, the underwriter specifically agrees to absorb any unsold shares.
3. An alternative to absorption is the creation of a new company. These different choices have different tax implications for both the company and its shareholders.
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