IPO underwriters

The Underwriters of the issue usually are investment banks or financial institutions who have IPO specialist in their team and they give guarantees for a specific number of shares to be sold at that initial price and they will purchase any surplus shares.

The underwriter reaches out to its network of investment organizations such as mutual funds, insurance companies and other large investment companies to gauge investment interest and organizes a road show. The amount of interest received by these large institutional investors help the underwriter determine the IPO price of the company's stock. The underwriter receives an underwriting fee in return for their services.

Answered on 2019-01-07