underwriting outline

underwriting spread,

• $ paid for underwriting

• negotiated underwriting
• built into price, competitive underwriting

spread for corporate issue,

• difference between public offering price and issuer proceeds

spread for a municipality

• difference between reoffering yields and syndicate bid to issuer 

spread factors

• size of issue
• size of corporation
• size of industry
• size of minicipality
• reduced by underwriter's advertising and registering/blueskying costs
• divided among syndicate members and broker/dealer that assists in selling issue

sales charge

• lead underwriter gets part
• known as manager's fee
• part of total spread
• manager gets fee on every share of bond sold-did preparation work
• concession, syndicate member decides selling group will sell bonds for them, syndicate member gives part of spread to selling group member
• syndicate members get rest of spread

corporate spread

• manager's fee, compensation for work on underwriting. 
• receive manager's fee even if they don't sell shares
• underwriting fee. sales charfe beyond manager's fee
• underwriting fee, biggest part of sales charge
• get underwriting fee not used in concession, if syndicate members allow selling group broker/dealers to sell shares
• no name, remainder of underwriting fee not used in concession
• syndicate member a)get underwriting fee b)give concession to selling group member

 In a corporate issue, a syndicate member receives which of the following upon sale as part of the underwriting?

• underwriting fee
• underwriting fee for syndicate sales
• managing fee, manager gets
• concession, for selling group sales

Municipal spread

• manager's fee, for syndicate manager, gets even if he doesn't sell the bonds
• total takedown, for syndicate members and syndicate manager
• selling group, gets concession for sales
• total takedown, concession and additional takedown 
• manager buys municipal issue at a discount
• total takedown, manager awards bonds to syndicate members excluding discount 
• total takedown= concession + additional takedown

In a municipal issue, a syndicate member receives which of the following upon sale of part of underwriting?

• takedown
• syndicate gets takedown
• selling group member receives additional takedown
• spread, total

underwriting outline

• effective date, date issue is released to be sold
• quiet period, cooling off period, time from filing of registration statement to effective date 
• 20 day cooling off period
• allows issuer to do final review of issue
• allows issuer to register with states where issue will be sold-blueskying 
• gives public time to hear news about new issue
• gives SEC time to review prospectus-is required information present?

preliminary prospectus, red herring

• price is NOT shown
• industry people NOT general public CAN receive information about issue
• quiet period, NO promotion or sales of issue 
• effective date, wait until E.D. announced, then can solicit 
• preliminary prospectus CANNOT have ads included

underwriter and syndicate members determine the price the public will buy issue @ 

• selling syndicate looks at 1)current performance of company, 2)value of company against market c)look at corporate dividends and earnings, products, other companies in industry, other factors that affect market price public is willing to pay
• selling group, NO influence on price

Which of the following can be sent with the preliminary prospectus?

• nothing
• registration isn't done
• until issue effective, advertising CANNOT happen

prospectus

• Securities Act of 1933: stock and corporate bonds must include prospectus
• comes with registration statement
• SEC reviews before release
• SEC makes sure necessary info has been included, disclosures made

tombstone advertisement

• in newspaper
• underwriters show new issue is available
• primary issue, corporation to investors
• secondary distribution, large stockholder selling to other investors 
• split offering, corporation and large corporation are selling securities at same time 

underwriting outline

• new corporate issue MUST register with SEC
• sold 1)underwriting 2)private placement
• with underwriting corporate officers can sell some of their shares-underwriting is both primary and secondary underwriting
• primary part, new shares from company
• secondary underwriting, stock from selling stock holders
• bonds, preferred stock, common stock
• lead underwriter, sells securities
• selling syndicate, help sell securities
• corporations negotiate with underwriter to reduce cost of selling issues

issuer

• provide information for prospectus
• supply issue certificates
• 
  

underwriters

• a)register issue
•  b)sell issue
•  c)inform public about issue
• d) form selling syndicate, at time of negotiation with issuer underwriters 
• e)write prospectus-satisfy SEC disclosure requirement, provide info for selling broker/dealers to give to clients
• blueskying, register issue with states where it will be sold 

Important underwriter decisions:

• a)register issue with SEC
  b)make sure issue satisfies state requirements
• b)determine broker dealers to include in syndicate

The syndicate manager is responsible for

• blueskying the issue
• sending the registration statement to the SEC
• putting the prospectus together
• determining  allocations for syndicate members
• stabilizing issue
• allocating securities for syndicate
• issuer gives firm necessary info and syndicate manager finishes registration 
• managers direct underwriting process
• stabilizing issue happens at initial offering, maintaining public offering price

effective date

• date the issue is released to be sold