underwrite: Definition and Much More from Answers.com

Insurance: to assume risk in exchange for a Premium.

Investments: to assume the risk of buying a New Issue of securities from the issuing corporation or government entity and reselling them to the public, either directly or through dealers. The Underwriter makes a profit on the difference between the price paid to the issuer and the Public Offering Price called the Underwriting Spread.

Underwriting is the business of investment bankers, who usually form an Underwriting Group (also called a Purchase Group or syndicate) to pool the risk and assure successful distribution of the issue. The syndicate operates under an Agreement Among Underwriters, also termed a syndicate contract or Purchase Group contract.

The underwriting group appoints a Managing Underwriter, also known as lead underwriter, syndicate manager, or simply manager, that is usually the originating investment banker-the firm that began working with the issuer months before to plan details of the issue and prepare the Registration materials to be filed with the Securities and Exchange Commission. The manager, acting as agent for the group, signs the Underwriting Agreement (or purchase contract) with the issuer. This agreement sets forth the terms and conditions of the arrangement and the responsibilities of both issuer and underwriter. During the offering period, it is the manager's responsibility to stabilize the Market Price of the issuer's shares by bidding in the open market, a process called Pegging. The manager may also appoint a Selling Group, comprised of dealers and the underwriters themselves, to assist in Distribution of the issue.

Strictly speaking, underwrite is properly used only in a Firm Commitment underwriting, also known as a Bought Deal, where the securities are purchased outright from the issuer.

Other investment banking arrangements to which the term is sometimes loosely applied are Best Effort, All or None, and Standby Commitments in each of these, the risk is shared between the issuer and the Investment Banker.

The term is also sometimes used in connection with a Registered Secondary Offering which involves essentially the same process as a new issue, except that the proceeds go to the selling investor, not to the issuer. For these arrangements, the term secondary offering or Secondary Distribution is preferable to underwriting, which is usually reserved for new, or primary, distributions.

There are two basic methods by which underwriters are chosen by issuers and underwriting spreads are determined: Negotiated Underwritings and Competitive Bid underwritings. Generally, the negotiated method is used in corporate equity (stock) issues and most corporate debt (bond) issues, whereas the competitive bidding method is used by municipalities and public utilities. See also Allotment; Blowout; Floating an Issue; Flotation Cost; Hot Issue; Initial Public Offering; Presold Issue; Primary Market; Public Offering; Standby Underwriter.

This entry contains information applicable to United States law only.

To insure; to sell an issue of stocks and bonds or to guarantee the purchase of unsold stocks and bonds after a public issue.

The word underwrite has two meanings. To issue an insurance policy on the life of a person or on property of another is to underwrite that person or property; hence insurance companies are also referred to as underwriters.

The other meaning refers to the issuing of stocks or bonds by a corporation or a government agency to raise capital. The underwriter is a company, often an investment bank, that agrees to sell the securities. Under its contract with the corporation, the underwriter agrees to pay for any unsold shares.

An underwriter operates by purchasing all of the new issue of stocks or bonds from the corporation at one price and selling the issue in smaller lots to public investors at a price high enough to cover the expenses associated with the sale and to provide a profit. When making a public offering of securities, an underwriter is responsible for setting the offering price. It uses its knowledge of the stock market and current interest rates and yields to determine the likely demand for the issue.

Typically, an underwriter does not underwrite and distribute a security issue alone but instead organizes a syndicate for the venture. Syndicates are often used when the amount of capital sought by a corporation is much larger than a single underwriter cares to risk. By dividing the underwriting of the securities issue, the risk is spread among the various members of the syndicate. The firm that originates the issue acts as manager of the syndicate.

If an underwriter cannot organize a syndicate large enough to cover the entire issue, it usually will arrange with stock brokerage firms to purchase shares at a reduced price, called a concession. This price reduction provides the brokerage firms with a margin to cover expenses and a small profit upon resale.

A corporation selects an underwriter either through private negotiation of a contract or through competitive bidding. In a bidding process, the corporation sets the terms of the issue and then invites potential underwriters to submit bids. The issue is then sold to the highest bidder.

Dansk (Danish)
v. tr. - signere, underskrive, tegne; forsikring
v. intr. - signere

Nederlands (Dutch)
(financieel) steunen, assureren, afsluiten (verzekering), aanvaarden (risico/ aansprakelijkheid), kopen (niet geplaatste aandelen), onderschrijven, onder iets schrijven

Français (French)
v. tr. - (Assur) réassurer, assurer contre, garantir, (Comm, Fin) financer, soutenir, soutenir/souscrire à (une proposition), garantir (l'émission de) (Bourse)
v. intr. - (Assur) réassurer, assurer contre, garantir, soutenir/souscrire à (une proposition), (Fin) financer, garantir (l'émission de) (Bourse)

Deutsch (German)
v. - (als Versicherer) unterzeichnen, garantieren, übernehmen

Ελληνική (Greek)
v. - (αντ)εγγυώμαι, (οικον.) αντασφαλίζω, αναδέχομαι έκδοση (αξιογράφου), υποστηρίζω οικονομικά

Italiano (Italian)
sottoscrivere

Português (Portuguese)
v. - subscrever

Русский (Russian)
подписывать, подписываться, подписывать страховой полис, подтверждать (письменно), гарантировать, принимать на страх (недвижимость, товары и пр.), оказывать финансовую поддержку

Español (Spanish)
v. tr. - asegurar, garantizar, subscribir
v. intr. - trabajar en seguros

Svenska (Swedish)
v. - skriva under, garantera

中文（简体） (Chinese (Simplified))
签名于下, 承诺支付, 经营保险业

中文（繁體） (Chinese (Traditional))
v. tr. - 簽名於下, 承諾支付
v. intr. - 經營保險業

한국어 (Korean)
v. tr. - ~의 아래에 쓰다, 보험을 계약하다
v. intr. - ~의 아래에 쓰다, 보험업을 운영하다

日本語 (Japanese)
v. - 保険を引き受ける, 一括して引き受ける, 署名する, 保険業を営む, 保証する

العربيه (Arabic)
‏(فعل) تعهد بالدفع عند الحاجه, ضمن‏

עברית (Hebrew)
v. tr. - ‮התחייב לממן, ביטח, ערב, כתב למטה, חתם‬
v. intr. - ‮עבד כאיש-ביטוח‬

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