Once a business has decided that it needs to raise capital to meet its organizational objectives, they must determine how to raise the needed capital. Most corporations at this point will hire an investment banker, also known as an underwriter, to advise them. The underwriter works for the issuer and it is their job to advise the client about what type of securities to offer. The issuer and the underwriter together determine whether stocks or bonds should be issued and what the terms will be. The underwriter is responsible for trying to obtain the financing at the best possible terms for the issuer. The underwriter will:
- Market the issue to investors
- Assist in the determination of the terms of the offering
- Purchase the securities directly from the issuer to resell to investors
The issuer is responsible for:
- Filing a registration statement with the SEC
- Registering the securities in the states in which it will be sold, also known as blueskying the issue
- Negotiating the underwriter’s compensation and obligations to the issuer
Types Of Underwriting Commitments
InvestingThrough an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
InsuranceA greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
TradingFind out how companies can save or boost their public offering price with these options.
Personal FinanceInvestment bankers are essentially corporate financial advisors and can help companies manage the process of raising financing for their activities.
InvestingInvestment banks provide financial advice to businesses and governments and help them raise capital through the sale of stocks, bonds and other products.
InsuranceLearn how flipping activity affects an initial public offering.
InsightsEnergy Fuels will use the proceeds to fund various projects, including shaft sinking and evaluation at its high-grade Canyon mine project in Arizona.
Small BusinessBecause underwriters work on one side of the Chinese wall and analysts work on the other side, information gathered by the underwriters is not supposed to be shared with analysts.
InvestingAMC Entertainment priced at secondary offering at 31.50