Gross Spread

Definition of 'Gross Spread'


The difference between the underwriting price received by the issuing company and the actual price offered to the investing public. The gross spread is the compensation that the underwriters of an initial public offering (IPO) make to cover expenses, management fees, commission (or takedown) and risk. The majority of profits that the underwriting firm earns through the deal are often achieved through the gross spread. In addition to the gross spread, an initial public offering typically involves "fixed costs," such as legal and accounting consultants, and registration fees.

Investopedia explains 'Gross Spread'


A company, for example, may receive $36 per share for its initial public offering. If the underwriters sell the stock to the public at $38 per share, the gross spread - the difference between the underwriting price and the public offering price - would be $2 per share. The gross spread value can be influenced by variables such as the size of the issue, risk and volatility. Also called "gross underwriting spread," "spread" or "production."



comments powered by Disqus
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  2. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  3. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  4. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  5. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  6. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
Trading Center