Gross spread

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Gross spread

The fraction of the gross proceeds of an underwritten securities offering that is paid as compensation to the underwriters of the offering.

Gross Spread

In a public offering, the difference between the price an underwriter pays an issuer and the price at which it sells the offering to the public. That is, an underwriter pays the issuer an agreed-upon price to purchase an issue, which it then attempts to place with investors. When it places the issue, it charges the investor a certain price like any other trade. The difference is known as the gross spread; it forms the bulk of an underwriting firm's profits. See also: Fully subscribed, Overbooked, Underbooked.

gross spread

The difference in the price that an investor pays for a new security issue and the price paid the issuer by the lead underwriter. The gross spread is a function of a number of variables including the size of the issue and the riskiness, or price volatility, of the security. Also called underwriting spread.

Gross spread.

In an initial public offering (IPO), the gross spread is the difference between what the underwriters pay the issuing company per share and the per share price that investors pay. It's usually about 7%.

For example, if a stock is to be offered to the public at $10 a share, the underwriters may pay the issuing company around $9.30 per share. With millions of shares being sold, the 70 cents per share adds up to millions of dollars for the investment bank.

References in periodicals archive ?
The difference in gross spreads between penny stock and ordinary IPOs appears to be even wider than reported in Table I.
In 2004 and 2005, AEILIC is expected to continue to generate sustainable, controlled asset growth from its distribution channels while improving its profitability through improving gross spreads and maintaining expense discipline.
We also examine the differences in offering yield spreads and gross spreads among shelf public, nonshelf public, and 144A issues.
The Company calculates the above-mentioned gross spreads by subtracting from the sales of the respective marine petroleum product the cost of the respective marine petroleum product sold and cargo transportation costs.
Underwriting spreads are gross spreads defined as the difference between the offered amount and the proceeds to the issuer, expressed as the percentage of the offered amount (or issue size; Gande, Puri, and Saunders, 1999).
In 2004 and 2005, AEL is expected to continue to generate sustainable, controlled asset growth from its distribution channels while improving its profitability through improving gross spreads and maintaining expense discipline.
The level of IPO gross spreads has recently been of great interest to the industry and academicians.
Profitability is expected to continue the strong momentum initiated in 2003 and 2004 by increasing its gross spreads and low expenses as well as controlling its high growth.
However, the median gross spreads in all samples are equal to the 7% reported in Chen and Ritter (2000).
Profitability, for 2004 and 2005, is expected to continue the strong momentum initiated in 2003 by increasing its gross spreads and low expenses as well as controlling its high growth; however, if interest rates increase rapidly, the financial leverage and future profitability would deteriorate.
This was due, in large part, to an increase in gross spreads (average selling prices less net benchmark resin costs) in our stretch film business in the last eight months of the year.
Gross spreads for 1995 are within the company's pricing assumptions as compared to the record spreads earned in 1994.