DEFINITION of 'Underwriting Agreement'

A contract between a group of investment bankers who form an underwriting group or syndicate, and the issuing corporation of a new securities issue. The underwriting agreement contains the details of the transaction, including the underwriting group's commitment to purchase the new securities issue, the price that the underwriting group will pay to the issuing corporation and the initial resale price.

BREAKING DOWN 'Underwriting Agreement'

The underwriting agreement can be considered the contract between a corporation issuing a new securities issue and the underwriting group that has agreed to purchase and then resell the issue for a profit. The purpose of the underwriting agreement is to ensure that all of the players understand their responsibility in the process, thus minimizing potential conflict.

RELATED TERMS
  1. Underwriting Group

    A temporary association of investment bankers who wish to purchase ...
  2. Underwriting Fees

    Underwriting fees are monies collected by underwriters for performing ...
  3. Underwriter

    An underwriter is a company or other entity that administers ...
  4. Underwriting Spread

    The spread between the amount underwriters pay an issuing company ...
  5. Offering Price

    The price at which publicly issued securities are made available ...
  6. Undivided Account

    An underwriting system in which each underwriter in the group ...
Related Articles
  1. Insurance

    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 ...
  2. Insurance

    What is a Greenshoe Option?

    A greenshoe option is a provision in an underwriting agreement that allows the underwriter to buy up to 15% of the shares in an IPO at the offer price.
  3. Investing

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  4. Insurance

    What Does an Underwriter Do?

    In the investment world, an underwriter is a company that helps corporations or other issuing bodies distribute their securities.
  5. Trading

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  6. Investing

    Basics Of Federal Bond Issues

    Treasuries are considered the safest investments, but they should still be analyzed when issued.
  7. Insights

    Energy Fuels Announces $10M Bought Deal Offering (UUUU)

    Energy Fuels will use the proceeds to fund various projects, including shaft sinking and evaluation at its high-grade Canyon mine project in Arizona.
  8. Insurance

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

    Learn how flipping activity affects an initial public offering.
RELATED FAQS
  1. 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 Answer >>
  2. What does the underwriter do in a new stock offering?

    Learn the role an underwriter plays for an initial public offering, and the steps an underwriter takes in preparing for an ... Read Answer >>
  3. How does insurance underwriting differ from investment underwriting?

    Understand the difference between insurance underwriting and investment underwriting, including what types of risks an underwriter ... Read Answer >>
  4. What are examples of risks for all underwriter types?

    Learn about the risks faced by different types of underwriting activity. Explore specific examples of risks faced by insurance ... Read Answer >>
  5. What is real estate underwriting?

    See how underwriters for major lenders scrutinize real estate loans and manage their risk, and learn the origin of the term ... Read Answer >>
Hot Definitions
  1. Dumping

    In international trade, the export by a country or company of a product at a price that is lower in the foreign market than ...
  2. Tender Offer

    An offer to purchase some or all of shareholders' shares in a corporation. The price offered is usually at a premium to the ...
  3. Ponzi Scheme

    A fraudulent investing scam promising high rates of return with little risk to investors. The Ponzi scheme generates returns ...
  4. Dow Jones Industrial Average - DJIA

    The Dow Jones Industrial Average is a price-weighted average of 30 significant stocks traded on the New York Stock Exchange ...
  5. Revolving Credit

    A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center