Identify the components of underwriting spread
including take-down, commissions, risk, expenses and management fees.
Underwriters are compensated in the form of an underwriting spread
, or a discount from the face amount of the bonds.
90 per share or the price received by Minorco in the secondary offering less the underwriting spread
, whichever is lower.
1,2) Yet, a major source of underwriter revenue lies in the underwriting spread
, which in a firm commitment offering is the difference between the price paid for the issue by investors and the price paid to the issuer divided by the issue proceeds.
Market competition has allowed issuers to compress the underwriting spread
on their deals so low that broker-dealers are pricing primary deals at a wholesale level and thus selling almost exclusively to wholesale buyers.
Third, underwriting expenses (both the underwriting spread
and the other expenses of issuing equity) are negatively related to management quality and reputation.
Carifa, President and Chief Operating Officer of the Adviser and Chairman of the Fund stated, "Like a number of closed-end funds launched in the 1990s, the Fund was sold without the payment of any underwriting spread
by the Fund or its shareholders.
Moreover, national statistics showed that the average gross underwriting spread
--that is, the underwriter's compensation for purchasing bonds--of bonds offered through negotiated sale was higher than the average gross underwriting spread
of bonds offered using the competitive sale method.
The movement towards a la carte pricing of the underwriting spread
on an IPO is strongly empowering the corporate issuer," said Mr.
This paper focuses on the measurement of underwriting spread
effects for information costs, for bonds with structural or tax complexity, and for bonds containing equity-conversion options or bond-put options.
ATMs address many of the inefficiencies in the traditional issuance model, including negative price impact, discounted purchases, and large underwriting spreads
1998) and to lower underwriting spreads
and offering yields for nonconvertible debt issues (Miles and Miller, 2000).