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. Investment Bank - IB

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

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

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

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

    A negotiated contract between a company and a government that ...
  6. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
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 public. ...
  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 ...
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. 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.
  6. 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.
  7. Brokers

    Brokerage Functions: Underwriting And Agency Roles

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

    A Primer On Private Equity

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

    What is Underwriting?

    Underwriting is a term most often used in investment banking, insurance and commercial banking. Generally, underwriting means receiving a remuneration for the willingness to pay for or incur ...
  10. Bonds & Fixed Income

    A Primer On Preferred Stocks

    Offering both income and relative security, these uncommon shares may work for you.

You May Also Like

Hot Definitions
  1. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  2. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  3. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  4. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  5. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
  6. Irrevocable Trust

    A trust that can't be modified or terminated without the permission of the beneficiary. The grantor, having transferred assets ...
Trading Center