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.

  1. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  2. Unsubscribed

    Newly issued securities that have not seen much interest, or ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Underwriting

    1. The process by which investment bankers raise investment capital ...
  5. Undersubscribed

    A situation in which the demand for an initial public offering ...
  6. Investment Banking

    A specific division of banking related to the creation of capital ...
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