What is Eighthed?
To get eighthed is to be outbid or undercut by one-eighth of a dollar (12.5 cents).
How Does Eighthed Work?
Let's say Company XYZ is a big pension fund that wants to buy 500,000 shares of ABC Company from the DEF pension fund. The DEF pension fund is trying to sell the shares in the upstairs market (i.e., privately, between two parties rather than on the open market) because it knows that the trade will have a significant impact on the value of the ABC shares and it might not be able to unload all the shares at once.
Company XYZ offers $15 a share for the lot. Word is out that DEF pension is unloading its ABC Company shares, though, and the GHI pension fund decides it also wants to buy the shares. It offers $15.125 per share and gets the trade. Company XYZ has been eighthed.
Why Does Eighthed Matter?
Being eighthed is the same as bidding one penny higher on the Price Is Right. As long as your bid or offer is better than the next guy's, the degree to which it is better is often irrelevant. This can often make the other bidder feel wronged, but this is the game.
Because shares no longer trade in eighths of a dollar (they now trade in decimal form, to the penny), this term is rarely used, but when it is, it often refers to being undercut or outbid by tiny amounts.
