Understanding Stock Selling Groups: IPOs & Initial Offerings

The "selling group" is a term that is used when a stock is initially being offered to the public. Here are the basics of a selling group and what it entails.

Selling Group

The selling group is the collection of entities that are selling a particular security when it becomes available. For example, when an initial public offering takes place, the issuing company will work with an investment brokerage to get started. The brokerage will be in charge of determining how the shares of stock are released into the public.

Parts of a Selling Group

A selling group does not necessarily have to be only the company that is underwriting the initial public offering (IPO). Sometimes a company will want to keep access to the entire IPO. They might not want competitors to be able to benefit from this process. However, other times, investment brokerages will involve other brokers as well. They will allow these brokers to sell shares from the IPO instead of handling the whole thing themselves. When this happens, the underwriting group will sell the securities to the other broker at a markup. The broker will then be able to sell the securities to the market at an even higher price.