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).
