Gross spread refers to the fees that
underwriters receive for arranging and underwriting an offering of
debt
Debt is an obligation that requires one party, the debtor, to pay money Loan, borrowed or otherwise withheld from another party, the creditor. Debt may be owed by a sovereign state or country, local government, company, or an individual. Co ...
or
equity securities
A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...
. The gross spread for an
initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investm ...
(IPO) can be higher than 10% while the gross spread on a debt offering can be as low as 0.05%.
For example, if a company sells $100 million of shares in an IPO and the gross spread is 7%, the underwriting syndicate will receive fees of $7 million. These fees will be divided among the
underwriters arranging the offering.
External links
Underpricing versus Gross Spread: New Evidences on the Effect of Sold Shares at the Time of IPOsHow do investment banks price underwriting services for American Depository Receipts?Underwriter competition and gross spreads in the eurobond market
Securities (finance)
Stock market
Underwriting
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