Syndicate offerings

Key Points

  • Syndicates underwrite and distribute new securities to the investing public
  • Ameriprise Financial participates in the syndicate group for closed-end funds and preferred securities
  • Understand your rights when placing a conditional offer; you have the ability to cancel conditional offers prior to the issue pricing
  • Syndicate offerings are only available to purchase in non-qualified brokerage accounts

A syndicate offering is a means of bringing a new security to the market. The lead underwriter will put together a "syndicate" of several investment banking companies and broker-dealers to jointly underwrite and distribute the new offering to the investing public. 

Although Ameriprise Financial does not participate in equity IPOs or secondary offerings of common stock, Ameriprise will on occasion participate in the syndicate group for two types of syndicate offerings: closed-end funds and preferred securities.  

A Closed-end Fund (CEF) is a publicly traded investment company, which is typically actively managed.

  • Raises money from investors through an initial public offering (IPO)
  • Invests raised capital in securities and other assets
  • After the IPO, the shares of the CEF trade on an exchange (e.g.  the New York Stock Exchange) and may trade at a premium or a discount to the net asset value (NAV) of the underlying investments

A Preferred Security is a perpetual preferred or debt security issued by a corporation, which trades on an exchange.

  • These securities provide investors a stated quarterly dividend or interest payment that is typically fixed, but in some cases a defined floating rate (depending on the type of security) that must be paid before income is paid to common stockholders
  • Preferred securities take precedence over common stock in the event of a liquidation
  • Most preferred securities do not allow for voting rights

It is important to understand that IPO shares do not have a trading history, may be speculative and may not be suitable for all investors. Before determining that you would like to invest read the prospectus carefully so that you can make an informed decision.

Purchasing a CEF or a Preferred Security IPO – Conditional Offers:

When participating in an IPO of a CEF or preferred security, clients place a conditional offer to purchase shares of the syndicate offering. A conditional offer is not a firm order when placed, however a conditional offer will automatically convert to firm orders when the new issue prices and shares are allocated. It is important to understand your rights when placing a conditional offer. Clients have the ability to cancel conditional offers prior to the issue pricing; this can be accomplished by contacting your financial advisor prior to the pricing and allocation, or by calling Ameriprise Financial at 1.800.862.7919, Option 3, Option 1. Once the issue is priced, the shares will be posted in your account after the effectiveness of the registration statement. Note that in the case of an IPO which is oversubscribed, shares may be allocated on a pro-rata basis, if available.

 

Take the next step

If you would like more information about how CEFs or preferred securities may fit into your current investment strategy, or to learn about any available syndicate offerings, consult with your Ameriprise financial advisor or locate an advisor near you.