If an underwriter overestimates the demand for a firm's securities in a firm commitment offering,the underwriter can

Question

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In a firm commitment offering, the underwriter agrees to buy all the shares from the issuer and sell them to the public. If the underwriter overestimates demand, they cannot sell the shares back to the issuing firm, lower the bid price, increase fees, or cancel the issue and refund the fees. They bear the risk of any unsold shares.

If an Underwriter Overestimates the Demand for a Firm's Securities