Participating Underwriters

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Participating Underwriters

A group of firms, often investment banks, that specialize in the underwriting process, who join together to collectively bring to the market an issue of stock, bonds or other securities.

This group offering, typically called a syndicate, is generally undertaken to defray both the cost and risk of underwriting a large issuance of securities; however, this larger group also has greater marketing muscle and a larger client base they can sell to. One or more firms act as leaders for a particular syndicate.

The lead underwriter manages the deal and has primary responsibility for all record keeping. the syndicate will negotiate with the issuing firm concerning the number of shares to be issued, the price per share and guarantee the issuer a total amount of capital to be raised.

In turn, the syndicate attempts to resell these securities to the general public at a higher per share price, thus assuring themselves of a profit. Compensation for the participants varies and depends on the amount of the issue each firm is responsible for.

If the syndicate is unable to sell these securities to the public, they will, for a fee, “stand-by” and purchase any remaining shares for their own account or for future arbitrage opportunity. Upon completion of the selling of all securities in the secondary market the syndicate is dissolved.