Concession

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.

BREAKING DOWN '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 Articles
  1. Investing Basics

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  2. 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.
  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. Economics

    What is a Syndicate?

    A syndicate is a group of professionals that temporarily form into one entity to handle a large transaction that’s too big for each to handle alone.
  6. Options & Futures

    Haunting Wall Street: The Halloween Terminology Of Investing

    Beware of zombies and Jekyll and Hyde companies! Read about the spooky terms circulating Wall Street.
  7. Fundamental Analysis

    Top Reasons IPO Valuations Miss The Mark (MS, ZNGA)

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

    All About Impaired Risk Annuites and Insurance

    What are impaired risk insurance products and understanding life insurance rate classes, table ratings and flat extra premiums.
  9. Investing Basics

    5 Tips For Investing In IPOs

    It’s not easy to profit from IPO​s, but the money is there.
  10. Trading Strategies

    IPO Flippers And The Companies Who Hate Them (TWTR, ETSY)

    Learn how flipping activity affects an initial public offering.
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. How can I buy shares in the primary market?

    If you want to buy shares in the primary market, you need to either be part of a syndicate or one of the lucky few whose ... Read Full Answer >>
  4. 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 >>
  5. 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 >>
  6. 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 >>
Hot Definitions
  1. Socially Responsible Investment - SRI

    An investment that is considered socially responsible because of the nature of the business the company conducts. Common ...
  2. Inverted Yield Curve

    An interest rate environment in which long-term debt instruments have a lower yield than short-term debt instruments of the ...
  3. Presidential Election Cycle (Theory)

    A theory developed by Yale Hirsch that states that U.S. stock markets are weakest in the year following the election of a ...
  4. Super Bowl Indicator

    An indicator based on the belief that a Super Bowl win for a team from the old AFL (AFC division) foretells a decline in ...
  5. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  6. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
Trading Center