IPO Team – What does the managing underwriter do? – (11)

capacity, and its overall reputation. The company should know the answers to the following questions, at
Does the investment bank have strong research in its industry?
Is its distribution network mainly institutional or retail?
Is its strength domestic, or does it have foreign distribution capacity?
Depending on the size of the offering, a company may want to include a number of co-managers in order to balance the lead underwriters’ respective strengths and weaknesses.
A company should keep in mind that underwriters have at least two conflicting responsibilities—to sell the IPO shares on behalf of the company and to recommend to potential investors that the purchase of the IPO shares is a suitable and worthy investment. In order to better understand the company—and to provide a defense in case the underwriters are sued in connection with the IPO (see “Who may also be liable under the SecuritiesAct?”)—the underwriters and their counsel are likely to spend a substantial amount of time performing business, financial and legal “due diligence” in connection with the IPO, and making sure that the prospectus and any other offering materials are consistent with the information provided.
The underwriters will market the IPO shares, set the price (in consultation with the company) at which the shares will be offered to the public and, in a “firm commitment” underwriting, purchase the shares from the company and then re-sell them to investors. In order to ensure an orderly market for the IPO shares, after the shares are priced and sold, the underwriters

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s