Stabilizing Bid

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DEFINITION of 'Stabilizing Bid'

A practice used by underwriters to stabilize the secondary market price of a security after an initial public offering (IPO). The bid is made on behalf of the IPO's underwriters to repurchase shares at the offer price.

BREAKING DOWN 'Stabilizing Bid'

Stabilizing bids are one of many methods used by underwriters to support the price of the IPO. Stabilizing bids may be used to support a stock that has high selling pressure from investors looking to "flip" their purchased shares for a quick profit. Any attempt to use a stabilizing bid by an underwriter must be made known to the regulatory body of the market.

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RELATED FAQS
  1. What are the three phases of a completed initial public offering (IPO) transformation ...

    While some large and successful companies are still privately-owned, many companies aspire toward becoming a publicly-owned ... 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 >>
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