Firm Deal
Categories: Incorporation
We’ll start with “Firm Commit.” And there's the ultimate version, "I do." But we shan't go there for now.
The whole notion of a firm commit applies on a few fronts. Like…If a lender is lending dough, usually there is a contractual agreement, cleverly called a firm commitment letter, which specifies the amount of money the lender is willing to lend at a given interest rate with all the other terms spelled out…for a given time.
Like...“this offer is good for 30 days, or until June first, or until the werewolf crows.” What? They crow, don't they? Okay...howl. Whatever.
In an IPO, when a bank is selling shares on behalf of a company issuing them, a Firm Commit basically says that the bank is responsible for selling any unsold shares. That is, it’s called a “bought deal”...and the bank either sells those IPO shares to investors, or they buy them for their own account.
In a firm quote, the commitment involved usually refers to a broker dealer’s bid ask spread in selling shares. Like…she holds a few million shares of Amazon in inventory, and publishes to her constituency that she is firm as a buyer at eleven hundred two and 20, and a seller at eleven hundred eight and fifty.
If anyone matches those numbers, then she is legally obligated to sell to them. And just in case someone wants to buy a gajillion shares, i.e. more than she carries in her inventory...there is usually a limit number attached. “I stand firm on 100,000 at this price.” Something like that, anyway.
So…Firm. Think: obligated. Confirmed. Legally binding. And sometimes that last one'll give ya cramps. Try prunes.
Related or Semi-related Video
Finance: What is a Firm Deal: Commit, Qu...4 Views
Finance allah shmoop What are a firm deal Ah firm
commit and a firm quote No a lot of firms
here is by agra involved in this one No Well
okay people Yes You knew we were going to go
there We'll start with firm commit Well the whole notion
of a firm commit applies on a few fronts Like
if a lender is lending dough Well usually there is
a contractual agreement cleverly called a firm commitment letter and
it derives a firm deal like the deal will follow
that commitment And that letter specifies the amount of money
the lender is willing to lend at a given interest
rate With all the terms you know spelled out for
given time like this offer is good for thirty days
or until june first Or until the where wolf grows
What they crow Don't they Okay howl whatever In an
ai po when a bank is selling shares on behalf
of a company issuing them a firm commit gives rise
to a firm deal And it basically says that the
bank is responsible for selling any unsold shares That is
It's called a quote bought deal unquote And the bank
Either sells those aipo shares to investors or well they
buy them for their own account In a firm quote
the commitment involved usually refers to a broker dealers bid
ask spread in selling those shares like she holds a
few million shares of amazon in inventory and publishes to
her constituency that she is firm as a buyer at
eleven hundred two and twenty and a seller at eleven
hundred eight and fifty Got it sets one one zero
two point two zero in a cellar at one one
zero eight point five oh yeah that's how it would
look well if anyone matches those numbers then she is
legally obligated to sell them And just in case someone
wants to buy a good gillian shares i am or
than she carries in inventory well there's usually a limit
number attached to her offer for like i stand firm
on one hundred thousand at this price like a hundred
thousand shares and not a hundred thousand won something like
that anyway so firm think obligated confirmed contracted for legally
binding and sometimes yeah that'll give you cramps Just try 00:02:17.1 --> [endTime] prunes