If an underwriter buys securities from an issuing ﬁrm and sells them directly to a small number of investors, the underwriter has:

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This scenario describes a bought deal, where the underwriter purchases the securities from the issuing firm and immediately sells them to a small number of investors. This is in contrast to best efforts underwriting, where the underwriter agrees to use their best efforts to sell the securities but does not guarantee a specific amount, and firm commitment underwriting, where the underwriter agrees to purchase the securities from the issuer and then resell them to the public. The bid-ask spread on the securities is not mentioned in this scenario.

If an Underwriter Buys Securities from an Issuing ﬁRm and Sells