We are independent & ad-supported. We may earn a commission for purchases made through our links.
Advertiser Disclosure
Our website is an independent, advertising-supported platform. We provide our content free of charge to our readers, and to keep it that way, we rely on revenue generated through advertisements and affiliate partnerships. This means that when you click on certain links on our site and make a purchase, we may earn a commission. Learn more.
How We Make Money
We sustain our operations through affiliate commissions and advertising. If you click on an affiliate link and make a purchase, we may receive a commission from the merchant at no additional cost to you. We also display advertisements on our website, which help generate revenue to support our work and keep our content free for readers. Our editorial team operates independently of our advertising and affiliate partnerships to ensure that our content remains unbiased and focused on providing you with the best information and recommendations based on thorough research and honest evaluations. To remain transparent, we’ve provided a list of our current affiliate partners here.

What is an Underwriting Spread?

Malcolm Tatum
Updated May 16, 2024
Our promise to you
SmartCapitalMind is dedicated to creating trustworthy, high-quality content that always prioritizes transparency, integrity, and inclusivity above all else. Our ensure that our content creation and review process includes rigorous fact-checking, evidence-based, and continual updates to ensure accuracy and reliability.

Our Promise to you

Founded in 2002, our company has been a trusted resource for readers seeking informative and engaging content. Our dedication to quality remains unwavering—and will never change. We follow a strict editorial policy, ensuring that our content is authored by highly qualified professionals and edited by subject matter experts. This guarantees that everything we publish is objective, accurate, and trustworthy.

Over the years, we've refined our approach to cover a wide range of topics, providing readers with reliable and practical advice to enhance their knowledge and skills. That's why millions of readers turn to us each year. Join us in celebrating the joy of learning, guided by standards you can trust.

Editorial Standards

At SmartCapitalMind, we are committed to creating content that you can trust. Our editorial process is designed to ensure that every piece of content we publish is accurate, reliable, and informative.

Our team of experienced writers and editors follows a strict set of guidelines to ensure the highest quality content. We conduct thorough research, fact-check all information, and rely on credible sources to back up our claims. Our content is reviewed by subject-matter experts to ensure accuracy and clarity.

We believe in transparency and maintain editorial independence from our advertisers. Our team does not receive direct compensation from advertisers, allowing us to create unbiased content that prioritizes your interests.

Underwriting spreads are the difference between the price per share that is paid to an issuing corporation by an underwriter or underwriting group, and the public offering price that the underwriter offers to the public. The underwriting spread generally represents the net proceeds that the underwriter will realize from the investment. Depending on the size of the securities issue and the price that the shares can command on the open market, the underwriting spread can be significant.

There are several factors that can go into determining the size of the underwriting spread. Issues that are released by a corporation that is well known, large in size, and is considered to be financially stable will command a higher price per share at the time of the public offering. In addition to the nature of the issuing corporation, the type of security will also impact the underwriting spread. For example, stocks may bring a better return than a bond issue in some cases. The classification of the security as junior or senior will also impact the desirability of the issue to investors as well.

Along with the factors associated with the issuing entity, the commitment level of the underwriter will also impact the underwriting spread. When a syndicate such as an underwriting group is utilized for the issue, this means that several investment bankers are likely to be involved. The combined networking and resources that this collection of bankers can command versus those of a single underwriter can make a huge difference in the distribution and public awareness of the new security. Also, a syndicate would most likely be able to purchase and resell far more shares than a single underwriter.

The actual range for the underwriting spread is defined in the terms of agreement between the issuing corporation and the underwriter or underwriting group. In cases where the issue is under the auspices of a small company, the underwriting spread may be as low as a fraction of one percent for a bond issue. The spread on stock issues may be anywhere from ten to twenty-five percent. In the event that an underwriting group handles the resale of the securities, the underwriting spread is divided among the participants based on their level of participation in the initial purchase from the issuing corporation.

SmartCapitalMind is dedicated to providing accurate and trustworthy information. We carefully select reputable sources and employ a rigorous fact-checking process to maintain the highest standards. To learn more about our commitment to accuracy, read our editorial process.
Malcolm Tatum
By Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing to become a full-time freelance writer. He has contributed articles to a variety of print and online publications, including SmartCapitalMind, and his work has also been featured in poetry collections, devotional anthologies, and newspapers. When not writing, Malcolm enjoys collecting vinyl records, following minor league baseball, and cycling.
Discussion Comments
Malcolm Tatum
Malcolm Tatum
Malcolm Tatum, a former teleconferencing industry professional, followed his passion for trivia, research, and writing...
Learn more
SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.

SmartCapitalMind, in your inbox

Our latest articles, guides, and more, delivered daily.