penalty bid

(redirected from Penalty Bids)

Penalty Bid

An offer to buy the security offered in an IPO with the guarantee that the buyer will retain the security for a certain period of time. If the buyer sells the security before the time is over, the underwriter offering the security assesses a penalty on the buyer's broker, who may or may not pass the penalty on to the buyer. Usually the penalty is equal to the broker's commission on the trade. Underwriters accept penalty bids during an IPO to prevent the price of the security from declining through a sell-off.

penalty bid

A financial penalty sometimes imposed by the underwriter of a new securities issue against a broker whose customer(s) sold shares of the issue immediately after purchase. Penalty bids are imposed in order to keep the price of a newly issued security from declining.
References in periodicals archive ?
Underwriters used the report information in a number of ways -- including determining allocations in future IPOs, and imposing penalty bids on firms whose customers sold IPO shares prior to the expiration of the tracking period.
Stenhouse was off the mark with three penalty bids in quick succession from long range, but the tails of the revitalised Greens were clearly up as they began to claim the bulk of the 50-50 situations.
Aitken, who had squandered two more penalty bids, re-discovered his touch to land the extra points.
He was off target with two penalty bids before a breakaway Ponty try by flanker Richard Parks put the match back into the melting pot.