A
new issue of a
security that drops below its first
offer price very quickly. For example, a company may make an
IPO and ask $15 per
share. If its price drops to $12 per share that
trading day, it is said to be a broken issue (in this particular case, a broken IPO). Broken issues are commonly the result of lack of trust in the company's management, or bad news regarding the company that occurred during or just before the issue was made.
Speculators buy broken issues with the hope that the crashed price is too low and that a
correction will result in
gains.