Underwriting contract

In investment banking, an underwriting contract is a contract between an underwriter and an issuer of securities.

The following types of underwriting contracts are most common:^[1]

In the firm commitment contract the underwriter guarantees the sale of the issued stock at the agreed-upon price. For the issuer, it is the safest but the most expensive type of the contracts, since the underwriter takes the risk of sale.^[1]
In the best efforts contract the underwriter agrees to sell as many shares as possible at the agreed-upon price.^[1]
Under the all-or-none contract the underwriter agrees either to sell the entire offering or to cancel the deal.^[1]

Stand-by underwriting, also known as strict underwriting or old-fashioned underwriting is a form of stock insurance: the issuer contracts the underwriter for the latter to purchase the shares the issuer failed to sell under stockholders' subscription and applications.^[2]

References

1 2 3 4 "The Investment Banking Handbook" by J. Peter Williamson, 1988, ISBN 0-471-81562-4 , ""Underwriting Contracts", p. 128
↑ "The Law of Securities Regulation" by Thomas Lee Hazen, 1996, ISBN 0-314-08587-4, p. 405.

Corporate finance and investment banking

Capital structure

Transactions
(terms / conditions)

Equity offerings	At-the-market offering Book building Bookrunner Corporate spin-off Equity carve-out Follow-on offering Greenshoe Reverse Initial public offering Private placement Public offering Rights issue Seasoned equity offering Secondary market offering Underwriting

Mergers and acquisitions	Buy side Control premium Demerger Divestment Drag-along right Management due diligence Managerial entrenchment Minority discount Pitch book Pre-emption right Proxy fight Post-merger integration Sell side Shareholder rights plan Special situation Squeeze out Staggered board of directors Stock swap Super-majority amendment Tag-along right Takeover Reverse Tender offer

Leverage	Debt restructuring Debtor-in-possession financing Financial sponsor Leveraged buyout Leveraged recapitalization High-yield debt Private equity Project finance

Valuation

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