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Investment Dictionary


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Underwriter

 

An underwriter is a company (normally an investment bank) that organizes the selling of new security issues for the corporations. It is a financial intermediary that buys new issues of securities (shares or bonds) and sells them in the investment market for institutional and retail investors

 

The business model of underwriter is simple; such intermediary firm buys securities from the issuer (the company that wants to raise the capital) and tries to sell those securities at a higher price through distribution network to clients and other investors. If the investment bank provides full spectrum of investment banking services an interest conflict may occur. That’s why other underwriters take some percentage from selling value of the securities. When underwriter buys the securities on his own account he takes a lot of risk for himself, that’s why profits have to be reasonable. 

 






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