Firm Commitment

AAA

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.

INVESTOPEDIA EXPLAINS '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. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  4. Underwriting

    1. The process by which investment bankers raise investment capital ...
  5. Bought Deal

    In investment banking, a securities offering where an investment ...
  6. Standby Underwriting (Standby)

    A type of agreement to sell shares in an initial public offering ...
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. Options & Futures

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

    These terms may sound the same, but they mean very different things for home buyers.
  4. Investing Basics

    How Does Alibaba Make Money? A Simple Guide

    Alibaba broke IPO headlines--but making news and making money are two different things.
  5. In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.
    Investing News

    5 IPOs That Broke The Markets In 2014

    In 2014, stock markets traded at record levels and the US IPO market enjoyed activity not seen since the 2000 tech bubble. Here is a snapshot of some of the year’s most successful IPOs.
  6. Investing Basics

    Alibaba IPO: Why List In the U.S.?

    For companies like Alibaba, a U.S. listing can provide some benefits that they can't find at the exchanges nearer to home.
  7. Despite a booming market, some IPOs crashed and burned. Sure, going public brings a flood of capital, but it can also expose a company to unpredictable market forces.
    Investing News

    IPO Stinkers: The Biggest IPO FAILS of 2014

    Despite a booming market, some IPOs crashed and burned. Sure, going public brings a flood of capital, but it can also expose a company to unpredictable market forces.
  8. Investing News

    What is Alibaba?

    Alibaba might not yet have the name recognition of other ecommerce players like Amazon, but with its record-breaking IPO, it's due to be a global player.
  9. Investing Basics

    The Top Five Alibaba Shareholders

    In addition to the new public shareholders, BABA has several prominent major stakeholders. Here are the top five.
  10. Investing

    The Top Chinese Companies Traded In The U.S.

    While many Chinese companies trade only on foreign exchanges, some of the top Chinese companies who trade in the United States are global industry leaders.

You May Also Like

Hot Definitions
  1. Santa Claus Rally

    A surge in the price of stocks that often occurs in the week between Christmas and New Year's Day. There are numerous explanations ...
  2. Commodity

    1. A basic good used in commerce that is interchangeable with other commodities of the same type. Commodities are most often ...
  3. Deferred Revenue

    Advance payments or unearned revenue, recorded on the recipient's balance sheet as a liability, until the services have been ...
  4. Multinational Corporation - MNC

    A corporation that has its facilities and other assets in at least one country other than its home country. Such companies ...
  5. SWOT Analysis

    A tool that identifies the strengths, weaknesses, opportunities and threats of an organization. Specifically, SWOT is a basic, ...
  6. Simple Interest

    A quick method of calculating the interest charge on a loan. Simple interest is determined by multiplying the interest rate ...
Trading Center