If the managing underwriter of a distribution intends to exercise an overallotment option granted in connection with the offering, when is the distribution considered completed?
A syndicate member’s participation in the distribution is completed when all of the securities have been distributed and after any stabilization arrangements and trading restrictions in connection with the distribution have been terminated. A later exercise of an overallotment option does not affect the “termination” of the distribution, unless it is exercised for an amount exceeding the syndicate short position at the time of exercise. In this case, the distribution would be deemed to continue until the time that all the excess shares were sold. If the syndicate agreement is terminated before all of the shares have been sold, a syndicate member’s participation would be completed once its remaining shares are distributed and its financial interests in the offering are terminated.
