Undivided Account

AAA

DEFINITION of 'Undivided Account'

An underwriting system in which each underwriter in the group is responsible not only for selling its alloted amount of the new issue but also for selling any excess issue not sold by the underwriting group as a whole. This is also referred to as an "Eastern account", and it is the opposite of a divided account.

INVESTOPEDIA EXPLAINS 'Undivided Account'

For example, if an underwriter for an IPO is using the undivided account method and 90% of the issue is sold, all of the members of the underwriting group will have to share the excess that is not sold. To continue the example, if an underwriter was responsible for 30% of the issue and sold 25% of its allotment, it would be responsible for 30% of the leftover 10% above. Even if an underwriter sells more than its original allotment, if the full 100% of the underwriting group's allotment is not sold, that underwriter will still be responsible for the unsold amount.

RELATED TERMS
  1. New Issue

    A reference to a security that has been registered, issued and ...
  2. Underwriting

    1. The process by which investment bankers raise investment capital ...
  3. Eating Stock

    The forced purchase of a security when there are insufficient ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Lloyds Organizations

    An insurance syndicate that bases its organizational structure ...
  6. Volcker Rule

    The Volcker rule separates investment banking, private equity ...
RELATED FAQS
  1. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
  2. How does the strength of the IPO market affect the drugs sector?

    The strength in the IPO market is an important indicator of liquidity, risk appetite and innovation in the drugs sector. ... Read Full Answer >>
  3. Why are some spin-offs taxable and some are tax-free?

    The manner in which a parent company structures the spinoff and divests itself of a subsidiary or division determines whether ... Read Full Answer >>
  4. How does an underwriter syndicate work together on an initial public offering (IPO)?

    An underwriting syndicate is a group of investment banks that share the responsibility of marketing the shares of a company ... Read Full Answer >>
  5. Who are Berkshire Hathaway's (BRK.A) main competitors?

    Led by renowned investor Warren Buffett, Berkshire Hathaway (BRK.A) is involved with multiple sectors of industry, facing ... Read Full Answer >>
  6. What are the biggest stadium naming rights deals of all time?

    The top three stadium naming rights deals of all time were all for stadiums hosting New York City teams. The largest was ... Read Full Answer >>
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. 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.
  3. Entrepreneurship

    How Microfinance and Investment Banking Compare

    Investment banks and microfinance institutions (MFIs) provide similar services, but the clients they serve and the incentives that motivate them are very different.
  4. Entrepreneurship

    Should I Have An IPO on My Business

    The ultimate outside investment opportunity is going public through an initial public offering. However, IPOs come with costs that you may want to avoid.
  5. Fundamental Analysis

    Why Investment Bankers Need Financial Advisors

    Even the most successful investment bankers need financial advisors. Here's why.
  6. Fundamental Analysis

    Why Investment Bank IPO Valuations Go Wrong

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

    Adjusting Price Charts To Secondary Offerings

    Secondary offerings may require rapid readjustment of trading strategies.
  8. Economics

    Explaining the Glass-Steagall Act

    An act the U.S. Congress passed in 1933 as the Banking Act, which prohibited commercial banks from participating in the investment banking business.
  9. Investing

    How To Track Upcoming IPOs

    Interested in investing through IPOs? Here is the list of free sources for information on upcoming IPOs.
  10. Fundamental Analysis

    Investment Banks: Not a Good Bet Right Now?

    Investment banks might appear safe to investors at the moment, but they're probably more dangerous than advertised.

You May Also Like

Hot Definitions
  1. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  2. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
  3. Unlevered Beta

    A type of metric that compares the risk of an unlevered company to the risk of the market. The unlevered beta is the beta ...
  4. Moving Average - MA

    A widely used indicator in technical analysis that helps smooth out price action by filtering out the “noise” from random ...
  5. Yield Curve

    A line that plots the interest rates, at a set point in time, of bonds having equal credit quality, but differing maturity ...
  6. Productivity

    An economic measure of output per unit of input. Inputs include labor and capital, while output is typically measured in ...
Trading Center