Finance: What is an Underwriter?

What is an underwriter? Hit play to find out.

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Transcript

00:27

deal regularly and introduce you as part of their family selling a piece of your

00:32

company to that world you know hedge funds mutual funds private wealthy [List of benefits that come with an underwriter]

00:36

investors such that they are the you know financial wind beneath your wings [Skyscraper flying away]

00:41

for a brief moment in time the underwriter usually an investment bank

00:46

like the vaunted Goldman Sachs or Morgan Stanley or JP Morgan or UBS or Sumitomo

00:52

will actually themselves own whatever piece of your company you are bringing [Logos for the banks appearing]

00:57

public like if you're selling 18 million shares at 20 bucks the bank's our

01:01

underwriters take a new public will own all 18 million shares having paid you

01:07

$19.60 for them and then turning around five minutes later and selling them for

01:10

20 bucks to John Q invest or making 40 cents a share in spread or markup or in [Spread calculation shown]

01:17

this case 40 times 18 million or 7.2 million dollars just for the pleasure so

01:23

that's an underwriter and if they screw up well yeah and ironically the [Underwriter stamp]

01:27

announcement he'll see in the digital paper is usually in the shape of a

01:31

tombstone announcing everything why a tombstone well because it represents the

01:35

death of ambiguity or confusion in that company's former life as a private one [Gravestone for ambiguity]

01:40

The Undertaker's hopefully have far far away [The Undertaker running away with the word confusion]