Posted in Finance, Accounting and Economics Terms, Total Reads: 172
Definition: Friends and Family Shares
Friends and Family Shares basically this refers to a program of offering a company’s shares to some individuals like employees, family and friends before going for the Initial Public Offering. A business owner would like to ensure that the employees, friends and family (usually the investors in the business) should generate some wealth for their hard work and loyalty before the company gets listed.
This was a phenomenon quite prevalent in the United States during the Internet Boom of the 1990’s but lately this practice has mellowed down due to legal restrictions and the interference of the Securities Exchange Commission (SEC). Usually no more than 5% of the shares of the company are restricted for Friends and Family shares.
An example of friends and family shares given out was the Alibaba IPO where 5% of such shares were offered.