BU393 Lecture Notes - Lecture 2: Underwriting, Investment Banking
Document Summary
A cash offer requires the usually requires underwriters. Formulating the method used to issue the securities. Valuation & pricing securities (road show + book building = process of determining offer price) Selling the new securities (distribution of the shares to the market) Post-ipo liquidity provision typically, underwriters buy the offerings for less than offer price, and take the risk of being unable to sell all of the shares in the market. A syndicate/banking group is a group of underwriters who share risk to help sell the issue. A spread/discount is the difference between underwriter buying price and the offer price there are 2 possible underwriting arrangements. Negotiated bids: issuing firm negotiates terms with an investment banker. Competitive bid: issuer structures the offering themselves and secures bidding for the offering from different banks. I-banks usually join forces and form underwriting syndicates. Lead (cid:271)a(cid:374)ks i(cid:374) the sy(cid:374)di(cid:272)ate a(cid:396)e (cid:272)alled a (cid:862)fi(cid:374)a(cid:374)(cid:272)i(cid:374)g g(cid:396)oup(cid:863)
