Market out clause

Market out clause

A clause that may appear in an underwriting firm commitment that releases it from its purchase requirement if there are negative securities market developments.
Copyright © 2012, Campbell R. Harvey. All Rights Reserved.

Market Out Clause

A clause in some underwriting agreements abolishing the agreement under certain, defined circumstances. For example, if the economy suddenly enters a severe recession or the stock market falls 25%, it is unlikely that investors will be interested in a risky IPO. The market-out clause could then absolve the underwriting syndicate of its responsibility without penalty.
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