What is the 'Takedown'

The takedown is the price of a stock, bond or other security offered on the open market. The takedown will be a factor in determining the spread or commission underwriters will receive once the public has purchased securities from them. A full takedown will be received by members of an investment banking syndicate who have underwritten public offerings of stock, bonds or other securities. Dealers outside of the syndicate receive a portion of the takedown while the remaining balance remains with the syndicate.

'Takedown'

When a company offers new issues, such as publicly traded stocks or bonds, it will hire an underwriter, such as an investment banking syndicate, to oversee the process of bringing those new issues to market. The members of the syndicate take on most of the risk inherent in bringing new securities offerings to market, and in return, they receive a majority of the profit generated from the sale of each share.

The spread or commission of a given offering refers to the initial profit made from its sale. Once it’s sold, the spread has to be divided up among the syndicate members or other salespeople responsible for selling it. The syndicate will typically divide the spread into the takedown and the manager’s fee.

In this instance, the takedown refers to the profit generated by a syndicate member from the sale of an offering, and the manager’s fee will typically represent a much smaller fraction of the spread. For example, if the takedown is $2, the manager’s fee may be $0.30, so the total takedown paid to the syndicate members is $1.70. This is because the syndicate members have fronted money to purchase the securities themselves, and therefore assume more risk from the sale of the offering.

Other fees may also be taken out of the takedown. For example, a concession may be paid to members of a selling group who have not fronted money to purchase shares to sell to the public. A profit made by syndicate members on sales of this nature is known as an additional takedown.

Shelf Offerings

In a shelf offering, underwriters essentially take down securities off the shelf. A shelf offering allows a company to generate money from the sale of a stock over time. For example, if Company A has already issued some common stock, but it wants to issue more stock in order to generate some money to expand, update equipment or fund other expenses, a shelf offering allows it to issue a new series of stock that offers different dividends to stockholders. Company A is then said to be taking down this stock offering off the shelf.

The Securities and Exchange Commission (SEC) lets companies register shelf offerings for up to three years. This means that if Company A registered a shelf offering for three years in advance, it would have three years to sell the shares. If it doesn't sell the shares within the allotted time, it can extend the offering period by filing replacement registration statements.

RELATED TERMS
  1. Lead Bank

    A lead bank is a bank that oversees the arrangement of a loan ...
  2. Syndicate Bid

    A syndicate bid is a bid offered to stabilize the price of a ...
  3. Loan Syndication

    Loan syndication is the system of involving various lenders to ...
  4. Underwriting Spread

    An underwriting spread is the difference between what underwriters ...
  5. Shelf Registration

    Shelf registration is a regulation that a corporation can evoke ...
  6. Offering Price

    An offering price is the per share value at which publicly issued ...
Related Articles
  1. Managing Wealth

    How to Join an Angel Investor Group

    If you’re new to angel investing, it often helps to join a group that can partner up on deals and spread out the due diligence work.
  2. Investing

    The Issuance Procedure of High-Yield Bonds

    The issuance of corporate high-yield bonds can have several advantages over equity. A closer look.
  3. Investing

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  4. Insurance

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  5. Investing

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  6. Insights

    GW Pharmaceuticals' ADP Shares: What You Need to Know

    Explore details about GW Pharmaceuticals' public offering of ADSs, and learn the amount of shares that were offered and how much the company raised.
  7. Investing

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks, bonds and other securities are traded.
  8. Investing

    How To Calculate The Bid-Ask Spread

    It's very important for every investor to learn how to calculate the bid-ask spread and factor this figure when making investment decisions.
RELATED FAQS
  1. What is the difference between loan syndication and a consortium?

    Learn about Consortiums and Loan Syndications, two types of multiple banking arrangements designed to finance transactions ... Read Answer >>
  2. 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 stock in the ... Read Answer >>
  3. What's the difference between primary and secondary capital markets?

    In the primary market, investors buy securities directly from the company issuing them, while in the secondary market, investors ... Read Answer >>
  4. Who Are the Key Players in the Bond Market?

    The bond market can be broken down into three main groups: issuers, underwriters and purchasers. Learn what each set of players ... Read Answer >>
  5. How do I become an underwriter?

    Learn about the education, training and certification required to become an insurance underwriter and the important qualities ... Read Answer >>
Trading Center