The underwriters make guarantees to sell the entire issue of shares?

Answer:

Underwriters represent the group of representatives from investment banking, whose main function is to complete the necessary procedures to attract investments in the capital of the company-Issuer of securities. The underwriters do not have to give guarantees about selling an initial public offering (IPO). However, it depends on the type of underwriting, agreed with the Issuer. Each Type of underwriting varies in the amount of risk an underwriter takes over, and as a guarantor, kompensiruet. The two most common types of underwriting bought deals, and best deals.

To bought Internet, the underwriter purchases all of the company’s IPO issue and resells it to investors. The amount of compensation the underwriter is represented by the spread between the price at which the underwriter purchased the shares from the Issuer (usually at a discount) and the price at which the underwriter sells shares to the public. In this case, the guarantor shall bear all risks associated with the sale of securities of the issue it will be in his or her best interest to sell all new release because then all the unsold shares continue to bear the underwriter.

In the best deal, the surety is not necessary to purchase IPO issue, but only makes a guarantee for the company issuing shares, which it will use its “best efforts” to sell the issue to investors at the best price possible. Unlike bought the Internet, there are no consequences to the surety if the entire issue is not sold, the issuing company who is stuck with any unsold shares. Because there is less risk, more profit of the guarantor is limited even if the problem is not to sell, but because in the best situation of effort, the guarantor receives a fixed fee.

(To learn more, see: 5 tips for investing in IPO.)

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