Market Out Clause

Dictionary Says

Definition of 'Market Out Clause'

A stipulation in an underwriting agreement that allows the underwriter to cancel the agreement without penalty. A market out clause can be activated for specific reasons such as souring market conditions or simply because the underwriter is having difficulty in selling the company's stock. However, though the reasons can be varied, they must be noted in the market out clause.

Investopedia Says

Investopedia explains 'Market Out Clause'

The underwriter for an initial public offering (IPO) contracts with the issuing company to market and sell the company's stock to investors in the primary market. Of course, this entails a fair amount of risk resulting from overhype (witness Groupon) and other factors. Hence, a market out clause is generally invoked when the market has hit a rough patch or other IPOs have underperformed.

Sign Up For Term of the Day!

Try Our Stock Simulator!

Test your trading skills!

Related Definitions

  1. Underwriting

    1. The process ...
  2. Initial Public Offering - IPO

    The first sale ...
  3. Gross Spread

    The difference ...
  4. Piggy Back Registration

    When an ...
  5. Absorbed

    1. In a general ...
  6. Investment Bank - IB

    A financial ...
  7. Trading Floor

    The floor where ...
  8. Schedule I Bank

    A Canadian ...
  9. Reallowance

    In securities ...
  10. Transferable Underwriting Facility - ...

    A type of ...

Articles Of Interest

  1. 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.
  2. 5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  3. Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  4. Small Caps Boast Big Advantages

    Find out why little companies have the greatest potential for growth.
  5. Becoming A Financial Analyst

    A career as a financial analyst requires preparation and hard work, but the payoff can be especially rewarding.
  6. Wanna Be A Bigwig? Try Investment Banking

    A career in this high-stress field can be very rewarding for the right person. Find out if you have what it takes.
  7. How To Evaluate A Micro-Cap Company

    Learn how to think big by investing in smaller stocks.
  8. A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.
  9. Research Report Red Flags For Brokers

    Discover how to look past analysts' ratings to find winning stocks for your clients.
  10. How To Invest In Private Equity

    Private Equity might be a pricey investment, but returns are on the rise and the payoff could be big.

comments powered by Disqus
Recommended
Loading, please wait...
Trading Center