What it is:
How it works/Example:
In order to sell its securities to the public, a company first needs to retain the services of an investment banker to underwrite the issue. The role of the is to raise capital for the issuing company. The accomplishes this by purchasing the securities from the issuing at a predetermined price, then reselling them to the public for a . The re-offer price is that resale price.
Why it matters:
In most cases, a single investment-banking firm takes the lead role in setting up a new syndicate, to participate in the sale. This syndicate, in turn, often gathers an even larger group of broker-dealers to assist with the distribution of the . Their profits come from the advisory fee, which is a percentage of the size, as well as the difference between the purchase and the re-offer price.or . This lead firm, referred to as the managing , then often forms a larger group of bankers, called an