Concession

AAA

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.

RELATED TERMS
  1. Bond

    A debt investment in which an investor loans money to an entity ...
  2. Investment Bank - IB

    A financial intermediary that performs a variety of services. ...
  3. Underwriting Expenses

    Costs and expenditures associated with underwriting activity. ...
  4. Underwriting Agreement

    A contract between a group of investment bankers who form an ...
  5. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  6. Concession Agreement

    A negotiated contract between a company and a government that ...
RELATED FAQS
  1. How can average investors get involved in an IPO?

    An initial public offering, or IPO, is the first sale of stock by a new company, usually a private company trying to go ... Read Full Answer >>
  2. Do underwriters make guarantees to sell an entire IPO issue?

    Underwriters represent the group of representatives from an investment bank whose main responsibility is to complete the ... Read Full Answer >>
  3. In what ways does government regulation impact the insurance sector?

    Regulation is not consistent among all forms of insurance. The kinds of regulations imposed on AIG for guaranteeing credit ... Read Full Answer >>
  4. How does an underwriter syndicate work together on an initial public offering (IPO)?

    An underwriting syndicate is a group of investment banks that share the responsibility of marketing the shares of a company ... Read Full Answer >>
  5. What are the different ways I can file my income tax return?

    In contractual law, a letter of intent is a document that represents an agreement between parties before the final agreement ... Read Full Answer >>
  6. What is an indenture for a fixed income security?

    An indenture for a fixed-income security, also known as a bond indenture or trust indenture, is a contract that sets forth ... Read Full Answer >>
Related Articles
  1. Fundamental Analysis

    Interpreting A Company's IPO Prospectus Report

    Learn to decipher the secret language of the IPO prospectus report - it can tell you a lot about a company's future.
  2. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  3. Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  4. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  5. Fundamental Analysis

    Why Investment Bank IPO Valuations Go Wrong

    The costly services of investment banks don’t necessarily guarantee accuracy in IPO pricing.
  6. Investing

    4 Hottest IPOs in 2015

    Where is smart money headed this year? These are the most anticipated IPOs of 2015.
  7. Entrepreneurship

    Want To Sell Life Insurance? Read This First

    Looking for a career that offers big financial upside and the lure of self-employment? Insurance sales could well be for you.
  8. Investing

    The Biggest IPO Flops

    IPOs can be a great way to get in early, but these companies remind investors to be cautious when investing in new issues.
  9. Brokers

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  10. Fundamental Analysis

    A Primer On Private Equity

    Private equity investing is becoming more accessible for individual investors; find out how you can get involved.

You May Also Like

Hot Definitions
  1. Fracking

    A slang term for hydraulic fracturing. Fracking refers to the procedure of creating fractures in rocks and rock formations ...
  2. Mixed Economic System

    An economic system that features characteristics of both capitalism and socialism.
  3. Net Worth

    The amount by which assets exceed liabilities. Net worth is a concept applicable to individuals and businesses as a key measure ...
  4. Stop-Loss Order

    An order placed with a broker to sell a security when it reaches a certain price. A stop-loss order is designed to limit ...
  5. Covered Call

    An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset ...
  6. Butterfly Spread

    A neutral option strategy combining bull and bear spreads. Butterfly spreads use four option contracts with the same expiration ...
Trading Center