A market action that aims to protect a newly issued stock. It involves a lead underwriter intervening in the market by buying shares to prevent the stock from dropping below its offering price. Broadly speaking, stabilization¹ is a commitment from the lead underwriter that the underwriting syndicate will ensure a stable stock price after the initial public offering (IPO). In every IPO, instability in the aftermarket may arise when the stock is traded between buyers and sellers who are interested in quick profits. This may, sometimes, negatively influence the share price, driving it temporarily below the offering price.

It is therefore customary for the issuer to select, generally from within the bookrunners, a stabilizing manager (agent) to monitor the market and intervene by buying or offering to buy the securities to protect the price against the consequences of short-term trading during the initial period after listing. In most markets, stabilization can be carried out through the use of an over-allotment option.

This process is also referred to as a price stabilization.