Market Out Clause

AAA

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 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.

RELATED TERMS
  1. Gross Spread

    The difference between the underwriting price received by the ...
  2. Underwriting

    1. The process by which investment bankers raise investment capital ...
  3. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Administrative Order On Consent ...

    An agreement between an individual or business and a regulatory ...
  5. Terms And Conditions (Credit Card)

    A formal statement of the rules and guidelines that govern the ...
  6. Senior Move Manager

    Senior move managers (SMMs) help seniors downsize and relocate ...
Related Articles
  1. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  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. Investing Basics

    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 the secondary market.
  5. Trading Strategies

    Is Goldman Sachs Still A Winner?

    Goldman Sachs might not be the best dividend play out there, but there are other reasons you might want to consider it as an investment.
  6. Professionals

    What are the reasons that cause investment bankers to fail in their careers?

    Explore the main reason why investment bankers fail. Learn about the failures of investment firm CEOs Dick Fuld and James Cayne and how their careers were impacted.
  7. Retirement

    Time To Hire A Senior Move Manager?

    Watch for these signs that you or an elderly family member may need to downsize and move somewhere easier to manange. A senior move manager can help.
  8. Retirement

    A New Solution To Help Seniors Relocate

    As Americans age – and families try to cope – the new field of senior move managers helps seniors relocate to safer homes with the least possible stress.
  9. Investing Basics

    The 10 Biggest Latin American Banks

    Brazil is home to most of the major banks in Latin America, claiming six of the ten largest financial institutions in the region.
  10. Investing Basics

    What's the Role of an Investment Bank?

    Investment banks provide financial advice to businesses and governments and help them raise capital through the sale of stocks, bonds and other products.

You May Also Like

Hot Definitions
  1. Weight Of Ice, Snow Or Sleet Insurance

    Financial protection against damage caused to property by winter weather specifically, damage caused if a roof caves in because ...
  2. Weather Insurance

    A type of protection against a financial loss that may be incurred because of rain, snow, storms, wind, fog, undesirable ...
  3. Portfolio Turnover

    A measure of how frequently assets within a fund are bought and sold by the managers. Portfolio turnover is calculated by ...
  4. Commercial Paper

    An unsecured, short-term debt instrument issued by a corporation, typically for the financing of accounts receivable, inventories ...
  5. Federal Funds Rate

    The interest rate at which a depository institution lends funds maintained at the Federal Reserve to another depository institution ...
  6. Fixed Asset

    A long-term tangible piece of property that a firm owns and uses in the production of its income and is not expected to be ...
Trading Center