Hard Underwriting
Hard underwriting occurs when the underwriter agrees to purchase their allocated share of stock before the IPO opens. This means the underwriter is committed to buying the entire portion of the shares they are responsible for, regardless of whether they are sold to the public. In contrast, in a regular underwriting process, the underwriter is only liable to purchase any unsold shares after the IPO opens. This makes hard underwriting riskier for the underwriter but provides more certainty for the issuing company, as it guarantees that the company will receive the funds raised from the IPO.
Related Terms
Block Trade
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Liquidity Risk
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Liquidity Trap
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Accrued Expenses
An accrued expense is a cost that a company has incurred in the current accounting...
Capital Gain Or Loss
A capital gain is the profit earned from selling an asset at a higher price...
Cash and Cash Equivalents
Cash and cash equivalents are short-term assets classified under current assets on a company's balance...
