What is the underwriters role in a public offering?
First, the company will seek an underwriter, an investment or brokerage firm that will purchase the shares from the company issuing them and subsequently sell them in the public offering. A firm commitment is the most common type of underwriting. In a firm commitment underwriting, the underwriter contractually commits to purchase the securities at a closing following the effective date of the registration of the shares with the Securities Exchange Commission. The underwriter will draft an offer to purchase the shares, and if the company accepts, the underwriter will own the shares after closing. After purchasing the shares, the underwriter is responsible for marketing the securities so that it can sell them. Depending on the size of the public offering, the underwriter may form a group of other brokerages to help market the sale of the securities.
