Friends and Family Shares

AAA

DEFINITION of 'Friends and Family Shares'

A company's stock that is offered to preferred individuals, prior to its initial public offering (IPO). Issuers and bankers may offer "friends and family shares" to business associates, family members or friends, prior to the stock's launch to the public, allowing them a stake in the future success of the company. These shares may represent a small percentage of an offering, typically less than 5%, but can create significant gains for the holder.


Also called directed shares.

INVESTOPEDIA EXPLAINS 'Friends and Family Shares'

The lead underwriter for the IPO typically agrees to administer the friends and family shares as a service to the issuer. In the U.S., the Securities and Exchange Commission (SEC) has paid close attention to the effects of friends and family shares. Some of these shares are "flipped" during the IPO, creating large profits for the friends and family shares holders.

RELATED TERMS
  1. Specific-Shares Method

    A personal financial accounting method that, when used properly, ...
  2. Fully Paid Shares

    Shares issued in which no more money is required to be paid to ...
  3. Windfall Shares

    Shares given for free to insiders of a society, a firm or a company ...
  4. Shares

    A unit of ownership interest in a corporation or financial asset. ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  6. Mobile First Strategy

    Mobile first strategy is trend in website development where designing ...
RELATED FAQS
  1. 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 >>
  2. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  3. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  4. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  5. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>
  6. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  2. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  3. 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.
  4. Stock Analysis

    GrubHub (GRUB): Will it Deliver?

    Analysts are all over the map on GrubHub, but its latest quarterly numbers look pretty solid.
  5. Trading Strategies

    IPO Flippers And The Companies Who Hate Them

    Learn how flipping activity affects an initial public offering.
  6. Stock Analysis

    Will Jet.com Revolutionize Shopping?

    Jet.com has arrived and will look to steal market share from Amazon over the next several years. Will it be successful?
  7. Stock Analysis

    3 Things You Should Know About PayPal's IPO

    Read about what investors should consider before the PayPal IPO, including the company's strong revenue growth, business growth and competition.
  8. Economics

    Who Are the Baby Boomers?

    Baby boomer is a descriptive term for a person who was born between the years 1946 and 1964.
  9. Investing Basics

    Understanding Related-Party Transactions

    In business, a related-party transaction refers to a transaction where parties on both sides have a common interest or relationship.
  10. Economics

    What are Deliverables?

    Deliverables is a project management term describing an object or function that must be provided or completed by a certain due date.

You May Also Like

Hot Definitions
  1. Topless Meeting

    A meeting in which participants are not allowed to use laptops. A topless meeting organizer can also ban the use of smartphones, ...
  2. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  3. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  4. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  5. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  6. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
Trading Center
×

You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!