Series 22: Firm Commitment Underwritings

Firm Commitment Underwritings

With a firm commitment underwriting, the spread of a public offering is the difference between the public offering price (the price at which shares are sold to investors) and underwriter or dealer-manager’s discounted price; said another way, it is the total proceeds less the issuer’s proceeds. Several risk-related factors may influence the size of the underwriting spread, including the size and perceived financial stability of the issuer; type of security (stocks, bonds); and number and size of underwriters. The spread is also referred to as the underwriting proceeds.

spread = total proceeds – issuer’s proceeds

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