DEFINITION of 'Assimilation'

The absorption of stock by the public following a new issue. When a company offers shares of its stock for sale to the public for the first time, either through an initial public offering or through an add-on offering, the shares will first be allocated among underwriters. It is then the underwriters' job to assimilate all of the shares sold to investors.

BREAKING DOWN 'Assimilation'

Once the new shares belong to investors, they are traded on the secondary markets like any other security. A company that is well known, and sets a reasonable share price, will be more likely to see its new shares assimilated. Lack of assimilation can be a sign that investors are not confident in the company, or think it has overvalued its shares. Sometimes lack of assimilation may result from buyers not being fully aware of the stock offering, which would be reflective of an error on the part of the underwriters.

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