Stabilizing Bid

Stabilizing Bid defined: A “stabilizing bid” is an offer to buy a newly issued stock on the open market, and is a practice used by IPO underwriters to help stabilize the early days of trading in a security after its initial public offering (IPO). The bid to buy shares is made on behalf of the IPO’s underwriters to repurchase shares, usually at the IPO offering price to prevent it from falling below that price. Although the ability to use stablizing bids is openly disclosed in an IPO’s offering documents, that actual use of the stabilizing bid remains relatively rare as most underwriters attempt to price IPOs to allow for some early “pop” (or opening of trading at a price above the initial offering price).

Underwriters recently needed to perform stabilization on the following notable IPO’s:
– Facebook (Nasdaq:FB) stabilization occurred at $38 per share (IPO was at $38: in 2012)
– Zynga (Nasdaq: ZNGA) stabilization occurred at $9 per share (IPO was at $10: in 2011)
– Manchester United (NYSE: MANU) stabilization occurred at $14 per share (IPO was at $14: in 2012)

Above is a definition for “Stabilizing Bid” from PrivCo’s Private Company Knowledge Bank, the definitive online and e-book guide to private companies and private company deals.

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