Firm Commitment

DEFINITION of 'Firm Commitment'

1. A lending institution's promise to enter into a loan agreement with a specific entity within a certain period of time.

2. An underwriter's agreement to assume all inventory risk and purchase all securities directly from the issuer for sale to the public at the price specified.

BREAKING DOWN 'Firm Commitment'

1. The lender specifies the terms that that must be met in order for the loan to be processed. Also known as a "standby loan commitment".

2. In a firm commitment, underwriters act dealers and are responsible for any unsold inventory. The dealer profits from the spread between the purchase price and the public offering price. Also known as a "firm commitment underwriting".

RELATED TERMS
  1. Dealer

    A person or firm in the business of buying and selling securities ...
  2. Distributing Syndicate

    A group of investment banks that work to underwrite and sell ...
  3. Committed Facility

    A credit facility whereby terms and conditions are clearly defined ...
  4. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  5. Competitive Bid

    A step in the initial public offering process whereby an underwriter ...
  6. Best Efforts

    An agreement in which an underwriter promises to make a full-fledged ...
Related Articles
  1. Credit & Loans

    Pre-Qualified Vs. Pre-Approved - What's The Difference?

    These terms may sound the same, but they mean very different things for homebuyers.
  2. 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.
  3. 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.
  4. Stock Analysis

    Moderna Therapeutics: An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when highly valued biotech company Moderna Therapeutic files for an initial public offering (IPO).
  5. Stock Analysis

    Domo Inc: An IPO Candidate in 2016?

    Learn about key information on Utah-based technology startup Domo Inc. and how the Domo dashboard differentiates itself in the world of business intelligence.
  6. Stock Analysis

    GoDaddy Inc: How It's Fared Since the 2015 IPO (GDDY)

    Evaluate GoDaddy's stock performance since its April 2015 IPO, and determine how you would have fared had you invested in the company on day six.
  7. Stock Analysis

    If You Had Invested Right After Comcast's IPO (CMCSA)

    Evaluate how Comcast's stock has performed since the company's 1972 IPO, and learn how you might be a millionaire today had you invested a small sum in the IPO.
  8. Stock Analysis

    TransUnion - How It's Fared Since the 2015 IPO (TRU)

    Learn about the business of financial services company TransUnion and how the company's stock fared after its initial public offering in 2015.
  9. Stock Analysis

    AppNexus - An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when the hot ad tech company, AppNexus, finally files for an initial public offering.
  10. Investing News

    Predicting the Biggest IPO of 2016

    Find out which tech startup company will bring life back to the struggling IPO market with the biggest initial public offering in 2016.
RELATED FAQS
  1. When did Facebook go public? (FB)

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  4. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  5. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  6. How do corporate actions affect floating stock?

    Corporate actions, defined as a company's actions that affect the amount of outstanding company stock shares, can either ... Read Full Answer >>
Hot Definitions
  1. Flight To Quality

    The action of investors moving their capital away from riskier investments to the safest possible investment vehicles. This ...
  2. 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 ...
  3. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  4. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  5. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
Trading Center