ML Underwriters paid an issuer $37,748,700 as IPO proceeds. The IPO offered 1.86 million shares of which 1.835 million were sold at an offer price of $22 a share. The underwriting spread was 7.75 percent. What type of underwriting was this?

Question

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This was a firm commitment underwriting because ML Underwriters paid the issuer a fixed amount of $37,748,700 for the sale of the shares and assumed the risk of any unsold shares. The underwriting spread of 7.75 percent was their compensation for assuming this risk.

ML Underwriters Paid an Issuer $37,748,700 as IPO Proceeds