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Kaevyn04 Kaevyn04
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How does the size of an issue affect the fees charged by underwriters?

▸ Large issues have substantially larger direct costs and, thus, must charge a larger spread in order to be profitable for the underwriter.

▸ Although large issues generally have a smaller spread, the large number of shares released means that the total fees are somewhat larger than for smaller issues.

▸ Large issues generally have a similar spread to small issues and thus attract much greater fees.

▸ Large issues have a reduced spread, which means that the total fees are generally the same as for smaller issues.
Textbook 
Fundamentals of Corporate Finance

Fundamentals of Corporate Finance


Edition: 2nd
Authors:
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gturgtur
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Kaevyn04 Author
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Thanks
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