Question

Jones & Co. recently went public and received $23.07 a share on their entire offer of 30,000 shares. Keeser & Co. served as the underwriter and sold 28,500 shares to the public at an offer price of $26.50 a share. What type of underwriting was this?
a. Shelf
b. Best efforts
c. Oversubscribed
d. Private placement
e. Firm commitment

Answer 1

Answer:

e. Firm commitment

Explanation:

A firm commitment may be referred to as an agreement of the underwriter to assume all the inventory risk and also purchase all the securities of an IPO that is directly from the issuers for the public sale.

It is defined as the promise to take some designated action that is within the specified period of time. Here the underwriter commits to buy all unsold securities.

In the context, Jones & Co. went public and they sold their entire 30,000 shares at 23.07 dollar per share. Keeser & Co. served as underwriter for them and they sold 28,500 shares at a price of 26.50 dollar per share. Thus this is a firm commitment underwriting.