underwriting spread


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Underwriting spread

The income that is generated by the underwriting syndicate and the selling group, which is essentially the difference between the amount paid to the issuer of securities in a primary distribution and the public offering price.

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.

underwriting spread

References in periodicals archive ?
The company said that its investment adviser will bear all of the gross underwriting spread and pay the underwriters an additional supplemental payment of about USD0.11 per share, the difference between the public offering price and the proceeds per share received by the company, in the offering.
Identify the components of underwriting spread including take-down, commissions, risk, expenses and management fees.
The RFP should request that proposers provide their best estimate of the underwriting spread, broken down into the four typical spread components:
(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.
Underwriters are compensated in the form of an underwriting spread, or a discount from the face amount of the bonds.
Third, underwriting expenses (both the underwriting spread and the other expenses of issuing equity) are negatively related to management quality and reputation.
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.
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.
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.
That being said, a continuation of competitive market conditions, which may pressure underwriting spreads, could moderate the degree of NII improvement.
Underwriting spreads vary and typically are higher for classes that are more difficult to sell i.e.
This finding is consistent with previous results that reputable underwriters reduce the level of uncertainty regarding the issue leading to lower levels of underpricing for IPOs (Rock, 1986; Beatty and Ritter, 1986; Carter and Manaster, 1990; Carter et al., 1998) and to lower underwriting spreads and offering yields for nonconvertible debt issues (Miles and Miller, 2000).