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5 July, 01:51

D. L. Jones & Co. recently went public. The firm received $20.80 a share on the re offer ot25.000 shares. Keeser & Co. served as the underwriter and sold 23,700 shares to the public at an offer price of $22 a share. What type of underwriting was this?

A. best efforts

B. shelf

C. over subscribed

D. private placement

E. firm commitment

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Answers (1)
  1. 5 July, 05:30
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    Answer: E. firm commitment

    Explanation: The type of underwriting is known as firm commitment. Firm commitment underwriting is also known as bought deal and is one in which an investment banking firm commits to buy and sell an entire issue of stock and also assumes all financial responsibility for any shares left unsold i. e., it is an agreement by the underwriter to purchase all securities for an initial public offering (IPO) directly from issuers (D. L. Jones & Co.) for public sale ... Here, the underwriter (Keeser & Co.), acts as a dealer, buys all shares which it has to sell to make money and assumes inventory risks that comes along with unsold shares.
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