A bid entered by a syndicate manager or underwriter in the Nasdaq system to stabilize the price of a Nasdaq security prior to the effective date of a registered secondary offering. The term "penalty bid" is also used.




Taobiz explains Pre-Syndicate Bid
This is permissible under SEC Rule 10b-7; otherwise the practice is prohibited. Because the bid serves to stabilize the price of the stock, it helps facilitate distribution of the offering. This process is sometimes also referred to as "pegging".