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.

BREAKING DOWN '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. Friendly Loan

    A loan agreement between associates. This type of loan is known ...
  2. Immediate Family

    A person's smallest family unit, consisting of the closest relatives, ...
  3. Family Offices

    Family offices are private wealth management advisory firms that ...
  4. Friendly Hands

    A nickname for investors in an IPO who will likely hold onto ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  6. Going Public

    The process of selling shares that were formerly privately held ...
Related Articles
  1. Managing Wealth

    How to Lend Money to Family and Not Regret It

    It’s hard to refuse a family member’s request for a loan, but be sure to go into such arrangements with your eyes open.
  2. Small Business

    Has Nepotism Ever Worked?

    It may very well be that hiring a relative is the right course of action for you. But before you do, carefully consider how hiring family could hurt your business.
  3. Financial Advisor

    Why You Shouldn't Manage Your Friends' Money

    Your pals may like your returns, but it isn't wise for you to manage their money.
  4. Financial Advisor

    How Advisors Can Appeal to Nontraditional Families

    So-called traditional families represent less than 20% of U.S. households today. Here's how advisors can adjust.
  5. Insights

    Top 25 Richest American Families

    Find out who America's wealthiest clans are. Number 3 may give you a stomach ache.
  6. Managing Wealth

    Family Philanthropy: Developing a Cohesive Strategy

    Devising a cohesive family philanthropy strategy requires proper goal alignment, planning, management, procedural rules and constant evaluation.
  7. Small Business

    What is Love Money?

    Love money is seed money or capital an entrepreneur receives from friends or family to start a business.
  8. Personal Finance

    Budget Without Blowing Off Your Friends

    With a little planning, you can maintain your social life without breaking the bank.
  9. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  10. Financial Advisor

    Advisors: How to Ask Friends for Social Media Help

    Social media can be a difficult endeavor for those who didn’t grow up around technology, but younger friends and family can help quickly fill the void.
RELATED FAQS
  1. What are the different equity financing options available to companies in the United ...

    Learn what equity financing options are available to small, mid-sized and large companies within the United States and understand ... Read Answer >>
  2. Are IPOs available to short sell immediately upon trading, or is there a time limit ...

    The quick answer to this question is that an IPO can be shorted upon initial trading, but it is not an easy thing to do at ... Read Answer >>
  3. What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ... Read Answer >>
  4. What is a family Limited Liability Company (LLC)?

    Learn about family limited liability (LLC) companies and why they are useful tools in the United States to protect family ... Read Answer >>
  5. What is the best form of equity financing for a start-up company?

    Learn the equity financing options available to small business, and understand the best equity options for companies during ... Read Answer >>
Hot Definitions
  1. 403(b) Plan

    A retirement plan for certain employees of public schools, tax-exempt organizations and certain ministers. Generally, retirement ...
  2. Master Of Business Administration - MBA

    A graduate degree achieved at a university or college that provides theoretical and practical training to help graduates ...
  3. Liquidity Event

    An event that allows initial investors in a company to cash out some or all of their ownership shares and is considered an ...
  4. Job Market

    A market in which employers search for employees and employees search for jobs. The job market is not a physical place as ...
  5. Yuppie

    Yuppie is a slang term denoting the market segment of young urban professionals. A yuppie is often characterized by youth, ...
  6. SEC Form 13F

    A filing with the Securities and Exchange Commission (SEC), also known as the Information Required of Institutional Investment ...
Trading Center