THE DISTRIBUTION OF SECURITIES 91
a matter of record only.” This means simply that the syndi-
cate, the names of whose members are printed beneath the
advertisement, has sold out all its securities. But it does not
mean that subsyndicate firms which may have bought them,
have as vet resold them all to the public.
Distribution Following the Offering.—After the an-
nouncement to the public that the security is for sale, the syn-
dicate members and subsyndicate firms endeavor to dispose
of their respective allotments of the new security as rapidly as
possible. The buyers “on the offering” might be divided into
three chief classes: (1) pure investors, who subscribe to the
security in order to hold it for the sake of the income to be
derived from it; (2) speculative investors, who are willing to
hold it for income but who hope to be able to sell it out at a
profit to themselves sooner or later; and (3) speculators, who
plan to resell it as quickly as possible for a slight profit.
The proportion of these several classes of buyers in the case
of any given security depends primarily upon the nature of the
security, as well as the condition of the market at that particular
time. In the case of a small but very attractive and gilt-edged
bond issue, investors might conceivably purchase the whole
issue at once. But under most circumstances and with most
securities, particularly if the issue is a large one, probably a
considerable part will have to be sold to speculators. This is
natural enough, for the conservative investor almost always de-
mands “seasoned securities” and is apprehensive of those which
are new and yet untried. Since, therefore, in most cases there
is not sufficient investment demand to absorb the entire new
offering at once, the speculator must be relied upon to absorb
the surplus remaining in excess of this demand, at least for the
lime being.® Sometimes as much as 90% of a new issue of
stock may rest in speculative hands and only 10% with
investors, after the public offering has closed.
8 See Chapter II, p. 55.
