A temporary group of investment banks and broker-dealers who come together to sell new offerings of equity or debt securities to investors. The underwriter syndicate is formed and led by the lead underwriter for a security issue. An underwriter syndicate is usually formed when an issue is too large for a single firm to handle. The syndicate is compensated by the underwriting spread, which is the difference between the price paid to the issuer and the price received from investors and other broker-dealers.
Also referred to as an underwriting group, banking syndicate and investment banking syndicate.
An underwriting syndicate mitigates risk, especially for the lead underwriter, by spreading it out among all the participants in the syndicate. Since the underwriting syndicate has committed to selling the full issue, if demand for it is not as robust as anticipated, syndicate participants may have to hold part of the issue in their inventory. This exposes them to the risk of a price decline.
In exchange for taking the lead role, the lead underwriter gets a larger proportion of the underwriting spread and other fees, while the other participants in the syndicate receive a smaller portion of the spread and fees.
Investment dictionary. Academic. 2012.
Look at other dictionaries:
underwriter — Any person, banker, or syndicate that guarantees to furnish a definite sum of money by a definite date to a business or government entity in return for an issue of bonds or stock. A professional firm (e.g., investment banker) that handles the… … Black's law dictionary
underwriter — / ʌndəraɪtə/ noun a person or company that underwrites a share issue or an insurance COMMENT: When a major company flotation or share issue or loan is prepared, a group of companies (such as merchant banks) will form a syndicate to underwrite the … Dictionary of banking and finance
syndicate — /sindakat/ An association of individuals, formed for the purpose of conducting and carrying out some particular business transaction, ordinarily of a financial character, in which the members are mutually interested. An organization formed for… … Black's law dictionary
syndicate manager — See: managing underwriter … Financial and business terms
Lead Underwriter — A investment bank or other financial outfit that has the primary directive for organizing an initial public stock offering, or a secondary offering for companies that are already publicly traded. The lead underwriter will usually work with other… … Investment dictionary
Underwriting syndicate — A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: lead underwriter. The New York Times Financial Glossary * * * underwriting syndicate… … Financial and business terms
underwriting syndicate — A group of investment banks that work together to sell new security offerings to investors. The underwriting syndicate is led by the lead underwriter. See also: lead underwriter. Bloomberg Financial Dictionary * * * underwriting syndicate… … Financial and business terms
lead underwriter — The head of a syndicate of financial firms that are sponsoring an initial public offering of securities or a secondary offering of securities. Could also apply to bond issues. Bloomberg Financial Dictionary * * * lead underwriter UK US noun [C]… … Financial and business terms
Pre-Syndicate Bid — A bid entered by a syndicate manager or underwriter in the Nasdaq system to stabilize the price of a Nasdaq security prior to the effective date of a registered secondary offering. The term penalty bid is also used. This is permissible under SEC… … Investment dictionary
Lead Manager/Underwriter — The institution awarded the mandate by a borrower to raise money via a bond or loan or share issue. The lead manager guarantees the liquidity of the deal, arranges the syndication of the issue and undertakes a major underwriting and… … Financial and business terms