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Three Paths to an IPO

There are three ways an underwriter commits to love, honor, and eBay when they are taking a company public.

  • Best efforts. This is an odd legal term. What would "worst efforts" be? In practice, best efforts means that the underwriter is committed to only buy securities as a reseller or agent, not as a principal. They buy them and then turn around and dump—er, sell them. One of the big issues underwriters deal with is the question, "How much is enough?" That is, would Facebook still go public ...

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