Glossary - Underwriter
An underwriter is an individual or party that assesses and accepts the risk of another party in exchange for a fee, typically in the context of insurance, loans, or in issuing securities. In the financial markets, underwriters are critical in the process of raising capital for companies by determining the price of new securities, buying them from the issuer, and selling them to investors via the primary market.
Also known as
- Issuer
Use cases examples
- Initial Public Offering (IPO) Prospectus: Goldman Sachs, as the lead underwriter, will manage the distribution of shares to public investors.
- Insurance Policy: The underwriter assessed the risk profile of the insured property before issuing the policy terms.
Considerations for investors
- The reputation and expertise of underwriters can significantly influence the risk and potential return of investment in newly issued securities.
- Investors should consider the underwriter's assessment as part of their due diligence process.
Considerations for founders
- Understanding the role and requirements of underwriters can be crucial when seeking to raise capital through securities.
- The choice of underwriter can affect the terms, success, and cost of capital raising activities.
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