Laddering (of stock)

Baker, John JBaker at STRADLEY.COM
Tue Dec 4 15:43:52 UTC 2001

        The New York Times article, which is available at

describes the alleged practice of requiring brokerage customers, as a
condition of receiving allocations in an initial public offering, to
purchase additional shares in the aftermarket at progressively higher
prices.  As far as I can tell, this use of the term was invented by the
lawyers discussed in the article.  The earliest use I've seen is in a press
release from the law firm of Lovell & Stewart, LLP, carried on Business Wire
on March 14, 2001:  "The requirement that customers make additional
purchases at progressively higher prices as the price of VA Linux stock
rocketed upward (a practice known on Wall Street as "laddering") was
intended to (and did) drive Linux's share price up to artificially high

        Previously, "laddering" was applied only to the legitimate
investment technique of staggering bond maturities, as shown by this quote
from the December 1, 1987, issue of Money:  "If income is your chief goal,
but you still worry about possible drops in the value of your portfolio, you
might stagger your maturities even more - a technique known as laddering.
You might, say, buy bonds with two-, four-, six-, eight- and 10-year
maturities if you have sufficient capital.  If rates rise, you could
reinvest the short-term bonds at the higher rates as they mature.  On the
other hand, if rates fall, your longer-term bonds will appreciate in value."

John Baker

> -----Original Message-----
> From: Bapopik at AOL.COM [SMTP:Bapopik at AOL.COM]
> Sent: Monday, December 03, 2001 1:13 AM
> Subject:      Laddering (of stock)
>    "Laddering" is explained in "Flood of Lawsuits Puts Underwriters in
> Cross Hairs," by Jonathan D. Glater, SUNDAY NEW YORK TIMES, business
> section, 2 December 2001, on
>    Supposedly, during the 1990s, internet and other stocks were "laddered"
> to go higher, creating a stock bubble.

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