Underwriting agreementThe contract between a corporation issuing new publicly offered securities and the managing underwriter as agent for the underwriting group. Compare to agreement among underwriters.
All or none underwritingAll or none underwriting
An arrangement whereby a security issue is cancelled if the underwriter is unable to resell the entire issue.
Negotiated underwritingNegotiated underwriting
A securities offering process in which the purchase price paid to the issuer and the public offering price are determined by negotiation rather than through competitive bidding.
A bank or other financial institution's guarantee to a company that it will buy a certain number of shares in a company's new issue or rights issue, should the issue not be fully subscribed by other investors.From the company's point of view, having its new issue underwritten is a form of insurance. It means that if it has priced an issue too high and the market shuns it, the company can still be sure that it will get money from the new issue.Of course, security comes at a price. Underwriters charge a fee for the back-up they provide. If the new issue is very popular, it will pocket that fee and make a handsome profit. Occasionally, they get badly burned. New issues underwritten immediately before the 1987 stock market crash lost a lot of money.Sometimes companies do a rights issue at a deep discount to reduce the underwriting fees.
Underwriting incomeUnderwriting income
For an insurance company, the difference between the premiums earned and the costs of settling claims.
Underwriting CommissionUnderwriting Commission
The fee investment bankers charge for underwriting a security issue.
Further SuggestionsUnderwriting syndicate
Firm commitment underwriting