Series 24: Unsold Shares Of A Public Offering

Unsold Shares of a Public Offering

In a firm commitment underwriting, if the syndicate is not able to sell all the shares to the public in the offering, they are financially responsible for the remaining shares. The manner in which the unsold shares will be distributed is described in the agreement among underwriters (AAU). If the arrangement is a Western account, the syndicate members are financially responsible only for the shares they were allotted. This can be remembered through the phrase “Western walks” because the syndicate member can walk away after selling the shares. If the arrangement is an Eastern account the syndicate members are responsible for the unsold shares on a pro rata basis even if the unsold shares were not the shares they wer