Concession

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DEFINITION of 'Concession'

A selling group's compensation in a stock or bond underwriting agreement. The amount of compensation is based on the underwriting spread, or the difference between what the public pays for the securities and what the issuing company receives from the sale. Included in the underwriting spread is the management fee, selling concession and underwriter's compensation. The concession is usually calculated on a per-share or per-bond basis.

INVESTOPEDIA EXPLAINS 'Concession'

When a publicly traded company wants to raise capital by issuing stocks or bonds, it hires an investment bank to handle the transaction. This process is called underwriting. The underwriter gets compensated for the securities it sells, but is not always responsible for the securities it does not sell, as outlined in the underwriting agreement.

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