Question

Different between underwriting and best effort

Answer 1

Best efforts is a contractual term in which underwriter promises to make its best effort to sell as much as of securities offering as possible best effort agreements are used mainly for securities in a less than ideal market condition or with higher risk such as an unseasoned offering. Underwriters an issue was can handle public offerings in different ways the underwriters profit is based on how many shares are want itself and on the spread between the discounted purchase price and the price at which days should sold the shares firm commitment in a firm commitment underwriting the underwriter guarantees to purchase all of the securities being offered for sale by the issue regardless of whether or not they can sell them to investors others are market out mini and max and standby. Best efforts of payment does not guarantee that all the securities in the issue must be sold an issue or an underwriter agree upon a minimum level of sales and once the minimum has been reached the underwriter is not responsible for any securities in best Air Force agreement not only does the issuer not known the exact amount of capital raised until the offering is closed the issue or bears the risk of not selling enough securities to raise the desired capital this not only waste money on underwriting and filing fees at least the issue with the same need for cash that promoted the sale of securities in the first place best effort offering are more risky than firm commitment offerings NY most analysts and investors.