“Not all new issues of shares are underwritten, but it is clearly better to arrange that they should be if there is any chance than the issue may be unsuccessful”. Briefly comment on this statement.

CPA-Financial-Management-Section-3 Revision kit

An underwriter is a financial institution that undertakes to buy all shares not bought by members of the public . The institution therefore act as an insurer and ensures that.
(i). All shares are subscribed for
(ii) the firm is able to raise the required capital
The underwriter is paid an undertaking fees for his services. He could later sell the shares to potential investors at a gain (price above the issue price).

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