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What is a Group Sale?

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  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 28 August 2016
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    Conjecture Corporation
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A group sale is a type of securities sale in which all the investors involved in a single syndicate participate in the sale of a specific lot of securities. This is in contrast to what is known as a designated sale, in which only a select group of syndicate members participate in the process. With a group sale, all the members receive a portion of the proceeds from the sale, typically calculated on a pro rata basis.

An individual known as the syndicate manager normally handles the creation of a group sale. This manager works with institutional investors to determine the price for the sale of the securities, typically using guidelines that are agreed upon by the syndicate membership. Once the buyer makes a commitment, the manager handles the process of arranging for receipt of the payment and the transfer of ownership of the assets included in the sale to the new owners. After the syndicate manager confirms that the funds from the sale are received, he or she initiates the process of crediting a portion of the collected funds to each member of the syndicate. After completing the allocation process, the manager confirms the amounts credited to each syndicate member to make sure no errors in the distribution have taken place.

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In most cases, the division of the profits from the group sale is conducted on a pro rata basis. This means that each member is allocated his or her portion of the profits based on the amount of interest held in the recently sold securities. Using this pro rata approach helps to protect the interests of each syndicate member and make sure that no one receives an inordinate amount of profit from any sale, at the expense of the other members. Typically, a syndicate will use the same basic strategy for making purchases, as well as for any other sales of securities that may take place in the future. The only change in the process will be if the syndicate chooses to allow a designated sale, in which only a select group of the syndicate members agree to participate.

A group sale normally involves high volumes of securities and focuses on creating transactions within institutional rather than individual investors. This is usually a matter of practicality, since institutions are normally able to purchase securities in larger lots than individual investors can manage. In most nations, there are no legal restrictions that would prevent a group sale to an individual investor, providing that the investor has complied with any governmental regulations that may apply, and has the resources on hand to successfully complete the transaction.

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