Syndication
Principles of Finance glossary · Principles Of Finance
Definition
The formation of a group of underwriters to distribute a new issue.
Syndication in plain English
When a company wants to raise a huge amount of money by selling new stock or bonds, that's often too big and too risky for a single bank to handle alone. So the banks team up into a group — a "syndicate" — and split the job of finding buyers and sharing the risk. "Underwriters" are the banks that agree to buy the new shares or bonds and resell them to investors. It's like several friends chipping in together to buy a giant pizza wholesale, then each selling slices to their own classmates so no one person is stuck with the whole cost.
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