Assimilation

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  1. Issuer

    A legal entity that develops, registers and sells securities ...
  2. Seasoned Issue

    An issue of additional securities from an established company ...
  3. Original Issue Discount - OID

    The discount from par value at the time that a bond or other ...
  4. Break Issue

    A type of stock initial public offering (IPO) that trades below ...
  5. Underwriting

    1. The process by which investment bankers raise investment capital ...
  6. Dog And Pony Show

    A colloquial term that generally refers to a presentation or ...
RELATED FAQS
  1. What is authorized stock?

    Authorized stock represents the maximum number of common shares that can be issued legally by the company as stated in the ... Read Full Answer >>
  2. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ... Read Full Answer >>
  3. How do I purchase shares of a closed-end investment?

    Unlike open-end mutual funds that sell shares in the fund directly to investors, closed-end funds are traded on an exchange ... Read Full Answer >>
  4. What advantages do corporations have over privately held companies?

    The chief advantage that most publicly traded corporations enjoy – and the primary reason why private companies decide to ... Read Full Answer >>
  5. What does the underwriter do in a new stock offering?

    The underwriter in a new stock offering serves as the intermediary between the company seeking to issue shares in an initial ... Read Full Answer >>
  6. What is the best form of equity financing for a start-up company?

    Raising capital during the startup phase of a business can present challenges to an entrepreneur. Debt financing is difficult ... Read Full Answer >>
Related Articles
  1. Options & Futures

    Understanding Rights Issues

    Not sure what to do if a company invites you to buy more shares at discount? Here are some of your options.
  2. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  3. Investing Basics

    Social Media: High Risk, High Potential Returns

    Carefully selecting social media ETFs can provide you with the opportunity to diversify your portfolio and enjoy financial rewards due to user growth.
  4. Investing

    4 Hottest IPOs in 2015

    Where is smart money headed this year? These are the most anticipated IPOs of 2015.
  5. Investing News

    Investing In Social Media Startups? Read This First

    Several new social media startups are attracting large amounts of funding, based on their prospects of retaining a large user base and generating profits.
  6. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  7. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...
  8. Investing

    Top 10 Largest Global IPOs Of All Time

    We have compiled a list of the top 10 largest IPOs of all time. The results may surprise you.
  9. Investing Basics

    How Does Alibaba Make Money? A Simple Guide

    Alibaba broke IPO headlines--but making news and making money are two different things.
  10. Investing News

    5 IPOs That Broke The Markets In 2014

    In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.

You May Also Like

Hot Definitions
  1. Fixed-Income Arbitrage

    An investment strategy that attempts to profit from arbitrage opportunities in interest rate securities. When using a fixed-income ...
  2. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously been funded primarily by private investors. The alternative ...
  3. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  4. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  5. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  6. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
Trading Center