Forex

A Corporation going public hires an investment banker to help it sell its stock. This process is called underwriting. The investment banker functions as an intermediary between the issuing corporation and the public. In most cases, the underwriter (investment banker) purchases the stocks from the company for resale to the public. To reduce its own risk, the investment banker
may form an underwriting syndicate of other investment bankers to co-purchase the shares. The underwriting syndicate forms a selling group to sell specified allotments of the issue. The investment banker (underwriting syndicate) then marks up the price of the offering. This markup
represents the fee for the syndicate's service. The difference between the price the underwriter pays and the price the public pays is called the underwriting spread. The syndicate manager may bid on the stock in the offering to "stabilize" the price. This bid must be less than or equal to the offering price. By law, the prospectus must make this attempt to
stabilize the stock price known to the public. The SEC also requires the underwriter to investigate the issuing company-particularly any audits,
how it uses proceeds, its financial statements and the management team. This process is called due diligence.