The underwriter bears risk with a firm commitment because it buys the entire issue. Conversely, the investment
Question:
The underwriter bears risk with a firm commitment because it buys the entire issue.
Conversely, the investment banker avoids this risk under a best-efforts offering because it does not purchase the shares. Firm commitment underwriting is far more prevalent for large issues than is best-efforts underwriting. For an offering of a given size, the direct expenses of best-efforts underwriting and firm commitment underwriting are of the same order of magnitude.
Fantastic news! We've Found the answer you've been seeking!
Step by Step Answer:
Related Book For
Corporate Finance With Connect Access Card
ISBN: 978-1259672484
10th Edition
Authors: Stephen Ross ,Randolph Westerfield ,Jeffrey Jaffe
Question Posted: