Gross Spread

Categories: Banking

What you see if you're a prostitute's gynecologist.

Also, it's the term for the underwriter's share of a securities offering.

When a company wants to sell stock or raise money through a bond offering, it typically goes through an underwriter. That means the firm hires an investment bank to arrange the sale and underwrite the offering. Basically, the underwriter promises to buy the entire offering at a certain price, as long as it can sell to the public at a higher price. The difference between the numbers represents the gross spread.

You hire an underwriter to run an initial public offering of stock for the company you run. You are going to sell 2 million shares to the public for $22 a share. The underwriter's price is $20. You receive $40 million from the underwriter for the offering. Then the underwriter sells the stock to everyone else, earning $44 million in the process. They keep the $4 million profit out of the deal...their gross spread.

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