ShmoopTube

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finance a la shmoop what are a stern and Western accounts what are they well

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there are two different team methods in which underwriters or stockbrokers or

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investment bankers sell securities to their constituencies and that's $5 word [under writers, brokers and bankers on a stage]

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for mutual funds hedge funds and just generally wealthy people their

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constituencies of stock brokers quote team unquote is only a notional thing on

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Wall Street and the line between the two types of teams gets drawn clearly in a

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Western V Eastern style of selling think the Mississippi River a Western account [world map with western account/eastern account division]

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is a divided account what does that mean well like the Old West

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this style agreement is more or less every man woman or other for him/her or [western account paper on desk]

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itself it includes armadillos they're people and since in most deals there are [hand signing document]

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multiple syndicate partners who is responsible to sell is what really

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matters so in any given deal when the partners sign up to bid for the business

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to take whatever dot-com public it is those partners in a western-style [partners receiving stock]

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account who are each on the hook to sell whatever amount of shares or dollar

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volumes that they individually have committed to sell in other words you

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break it you bought it or rather you bid for it you own it in a Western account

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the allegory is the cowboy who has his own set of twenty eight cows he feeds [western account cowboy]

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clothes manages and you know provides a social life for all on his own at the [cows in a field]

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other end of the country yeah over here lives the eastern style account [map of USA with Eastern accounts]

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arrangement not sure what it is about East Coasters

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maybe it's the history of unions there but they all seem to want to work [people on strike]

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together and then go figure well Eastern account syndicates oblige

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members to sell not only their own allotment of shares but also the amount

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that is not sold by other syndicate members that is each individual member

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is not only on the hook to sell the shares that they have committed to sell

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but they're also responsible for selling the shares of the other players in their

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syndicate think like there's now 300 cows and each Cowboys got his 28 or so

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but he's got to worry about all 300 you can imagine that for a company nervous

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about getting all of their shares placed properly well they would lean hard on

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the investment bank to adopt an Eastern style team sales approach instead of a

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Western one regardless of eastern or western style deals the most important

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element in offering getting properly placed as of course that the bankers get

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paid as long as the contract is set up so that the banker only makes money if a

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successful deal happens well usually everyone selling securities is kept fat [guy throws money into the air]

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and happy and the same may not necessarily be said for the people who

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bought them

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