Underwriter (underwriter) – entity, which manages the process of issuing securities and their distribution. Any legal entity with a license can be an underwriter, that is, it can be either an investment company or an investment bank. This is a legal entity and offers investors to buy the issue of the issuer's securities.
The contract with the underwriter can be of two types:
- «A firm commitment» (Firm commitment) – the underwriter undertakes to purchase all securities, proposed for initial public offering, and resell them. The entire risk of the sale lies with the underwriter.
- «Maximum effort» (Best efforts) – sale of the maximum possible number of securities of a new issue without financial liability. The underwriter takes off part of the risk in the event, when part of the securities cannot be sold.
Underwriting in the securities market can be carried out by a syndicate of underwriters, that is, by a group of investment banks and / or investment companies. The underwriter syndicate is led by a lead underwriter. Lead underwriter arranges a syndicate for the placement of securities, maintains contacts with the issuer and keeps track of placed securities.
It is very common for securities to be placed with the participation of several investment banks, like how , or Yandex example, who chose several banks to participate in the placement.
Based on materials .
