Friends and Family Shares


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.

  1. Windfall Shares

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

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

    The first sale of stock by a private company to the public. IPOs ...
  4. Fully Paid Shares

    Shares issued in which no more money is required to be paid to ...
  5. Specific-Shares Method

    A personal financial accounting method that, when used properly, ...
  6. Corporate Social Responsibility

    Corporate initiative to assess and take responsibility for the ...
Related Articles
  1. Investing Basics

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  2. 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.
  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

    Is the Stock Market Crashing? 5 Signs to Consider

    Learn about some signs of a potential stock market crash including a high level of margin debt, lots of IPOs, M&A activity and technical factors.
  5. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  6. Fundamental Analysis

    Top Reasons IPO Valuations Miss The Mark

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
  7. Economics

    Explaining Silo Mentality

    A silo mentality occurs when certain departments in an organization do not share information or knowledge with other departments.
  8. Economics

    5 Steps of a Bubble

    In the financial sense, a bubble refers to a situation where the price of an asset far exceeds its fundamental value.
  9. Investing Basics

    Taking the guesswork out of IPO analysis

    Burned by IPOs before? Fear not. Learn how to distinguish overhyped new public companies from ones with a little more promise.
  10. Investing Basics

    5 Tips For Investing In IPOs

    It’s not easy to profit from IPO​s, but the money is there.
  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. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. 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 >>
  4. 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 >>
  5. 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 >>
  6. 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 >>

You May Also Like

Hot Definitions
  1. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  2. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
  3. Zero-Sum Game

    A situation in which one person’s gain is equivalent to another’s loss, so that the net change in wealth or benefit is zero. ...
  4. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  5. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  6. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
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!