Devolvement

DEFINITION of 'Devolvement'

When the undersubscription of a security issue forces the underwriting investment bank to purchase unsold securities during an offering. Devolvement is often an indication that the market currently has negative sentiments toward the issue. This negative sentiment can have a significant impact on subsequent demand.

BREAKING DOWN 'Devolvement'

Devolvement poses substantial risk for the underwriting investment bank. When it is required to purchase unsubscribed shares of an issue, it will often purchase the stock at a higher-than-market-value price. Because demand is lower than anticipated, there are few buyers for the security at its issued value. Typically, the investment bank will not hold onto the floundering issue for too long and will usually liquidate the shares in the market, often causing a financial loss.

RELATED TERMS
  1. Offering Price

    The price at which publicly issued securities are made available ...
  2. Underwriting Agreement

    A contract between a group of investment bankers who form an ...
  3. Back Stop

    The act of providing last-resort support or security in a securities ...
  4. Underwriting Group

    A temporary association of investment bankers who wish to purchase ...
  5. Negotiated Sale

    A method of offering municipal bonds or similar financial instruments ...
  6. Sticky Deal

    An issue of new securities that may present a selling challenge ...
Related Articles
  1. Investing

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Personal Finance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  3. Markets

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  4. Investing

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  5. Personal Finance

    The Rise Of The Modern Investment Bank

    Get to know a little bit about the institutions whose actions help to guide free markets.
  6. Investing

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  7. Investing

    What are Issued Shares?

    Issued shares are the amount of authorized stocks a company’s shareholders buy and own. The annual report shows the number of outstanding shares.
  8. Investing

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  9. Investing

    What's the Primary Market?

    The primary markets are where investors can get first crack at a new security issuance.
  10. Trading

    IPO Flippers And The Companies Who Hate Them (TWTR, ETSY)

    Learn how flipping activity affects an initial public offering.
RELATED FAQS
  1. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Answer >>
  2. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  3. How does insurance underwriting differ from investment underwriting?

    Understand the difference between insurance underwriting and investment underwriting, including what types of risks an underwriter ... Read Answer >>
  4. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  5. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter as well as the important ... Read Answer >>
  6. What are some roles of an investment bank?

    Explore the world of investment banking and discover the various functions that investment bankers serve, such as handling ... Read Answer >>
Hot Definitions
  1. Put Option

    An option contract giving the owner the right, but not the obligation, to sell a specified amount of an underlying security ...
  2. Frexit

    Frexit – short for "French exit" – is a French spinoff of the term Brexit, which emerged when the United Kingdom voted to ...
  3. AAA

    The highest possible rating assigned to the bonds of an issuer by credit rating agencies. An issuer that is rated AAA has ...
  4. GBP

    The abbreviation for the British pound sterling, the official currency of the United Kingdom, the British Overseas Territories ...
  5. Diversification

    A risk management technique that mixes a wide variety of investments within a portfolio. The rationale behind this technique ...
  6. European Union - EU

    A group of European countries that participates in the world economy as one economic unit and operates under one official ...
Trading Center