What Is Standby Underwriting?

Business & Management
#1

The term “standby underwriting” refers to a form of arrangement to sell shares in an initial public offering (IPO) in which the underwriting investment bank commits to buy any remaining shares after it has sold all of the shares it can to the public. The underwriter promises to buy any leftover shares at the subscription price, which is usually lower than the stock’s market price. This underwriting approach ensures that the IPO will generate a particular amount of money for the issuing firm.