Underwriting

This refers to the sale of new shares through third parties, for example investment banks.

For a fee, the institution performing the underwriting agrees to take a fixed amount of equity at a fixed price – guaranteeing the company’s capital receipts. The underwriter sells the new shares to other buyers taking a profit if the share value rises or a loss if there is insufficient demand.

Underwriting is a term normally found in financial management.

Explore our learning zone to discover more