Gross spread

The difference between the underwriting price received by the issuing company and the actual price offered to the public.

Investopedia Says:
By charging the public a higher price for an IPO than the price paid to the issuing company, the underwriters are able to make a profit. For example a company might get $15 per share for their IPO, but the underwriters sell the stock to the public at $17--profiting $2 per share.

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What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop. IPO Basics Tutorial
Thinking of investing here? We give you five tips to remember. The Murky Waters Of The IPO Market
Learning about these various activities can give insight into how securities are issued and traded. Brokerage Functions: Underwriting And Agency Roles

Difference (spread) between the public offering price of a security and the price paid by an underwriter to the issuer. The spread breaks down into the manager's fee, the dealer's (or underwriter's) discount, and the selling concession (i.e., the discount offered to a selling group). See also Concession; Flotation (Floatation) Cost.

Underwriter's margin in issuing new securities, or the difference between the price at which securities are sold to the public and the price paid by the underwriter to the issuer. The difference, the selling cost, includes the manager's fee and selling concession (the discount offered) to members of the underwriting syndicate.

Gross spread refers to the fees that underwriters receive for arranging and underwriting an offering of debt or equity securities. The gross spread for an initial public offering (IPO) can be higher than 10% while the gross spread on a debt offering can be as low as 0.05%.

For example, if a company sells $100 million of shares in an IPO and the gross spread is 7%, the underwriting syndicate will receive fees of $7 million. These fees will be divided among the underwriters arranging the offering.

External links

• Underpricing versus Gross Spread: New Evidences on the Effect of Sold Shares at the Time of IPOs
• How do investment banks price underwriting services for American Depository Receipts?
• Underwriter competition and gross spreads in the eurobond market

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