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 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. Investing Basics

    Social Media: High Risk, High Potential Returns

    Carefully selecting social media ETFs can provide you with the opportunity to diversify your portfolio and enjoy financial rewards due to user growth.
  4. Investing Basics

    Understanding Private Placement

    Private placement refers to offering and selling shares in a company to a small group of sophisticated buyers.
  5. Entrepreneurship

    JPMorgan vs. Goldman Sachs: A Tale of Two Stocks

    The performance of JPMorgan and Goldman has been impressive, but one has a slight edge.
  6. Investing

    4 Hottest IPOs in 2015

    Where is smart money headed this year? These are the most anticipated IPOs of 2015.
  7. Investing News

    Investing In Social Media Startups? Read This First

    Several new social media startups are attracting large amounts of funding, based on their prospects of retaining a large user base and generating profits.
  8. Fundamental Analysis

    Private vs Public Equity: What's Best?

    What is the better way for a company to attract investors; by making its stock available for sale to whoever wants some, or by petitioning rich people?
  9. Entrepreneurship

    Which is The Best Bank for Your Buck, BAC or MS?

    One things stands out between these financial services giants when it comes to investing in them.
  10. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...

You May Also Like

Hot Definitions
  1. DuPont Analysis

    A method of performance measurement that was started by the DuPont Corporation in the 1920s. With this method, assets are ...
  2. Asset Class

    A group of securities that exhibit similar characteristics, behave similarly in the marketplace, and are subject to the same ...
  3. Fiat Money

    Currency that a government has declared to be legal tender, but is not backed by a physical commodity. The value of fiat ...
  4. Interest Rate Risk

    The risk that an investment's value will change due to a change in the absolute level of interest rates, in the spread between ...
  5. Income Effect

    In the context of economic theory, the income effect is the change in an individual's or economy's income and how that change ...
  6. Price-To-Sales Ratio - PSR

    A valuation ratio that compares a company’s stock price to its revenues. The price-to-sales ratio is an indicator of the ...
Trading Center