Difference between the amount paid to an issuer of securities in a Primary Distribution and the Public Offering Price. The amount of Spread varies widely, depending on the size of the issue, the financial strength of the issuer, the type of security involved (stock, bonds, rights), the status of the security (senior, junior, secured, unsecured), and the type of commitment made by the investment bankers. The range may be from a fraction of 1% for a bond issue of a big utility company to 25% for the Initial Public Offering of a small company. The division of the spread between the Managing Underwriter, the Selling Group, and the participating underwriters also varies, but in a two-point spread the manager might typically get 0.25%, the selling group 1%, and the underwriters 0.75%. It is usual, though, for the underwriters also to be members of the selling group, thus picking up 1.75% of the spread, and for the manager to be in all three categories, thus picking up the full 2%. See also Competitive Bid; Flotation Cost; Gross Spread; Negotiated Underwriting; Selling Concession; Underwrite.
