A process in which an
issuer of
securities approaches an
underwriting firm to facilitate a
new issue. The issuer and the underwriter negotiate a
purchase price, which is the price for which the underwriter
buys the new issue, and an
offering price, the price at which the underwriter
sells the issue to
investors. The difference between these forms the underwriter's
profit. In negotiated underwriting, these discussions occur on an individual basis between the issuer and the underwriting firm. It contrasts with
competitive bidding, whereby a number of underwriters make offers to the issuer, who picks the most favorable offer.