Securities underwriting

The subscription of a security of the security is an investor's statement regarding the purchase of the security.

One of the important steps in the public issue of securities is the public offering. In the form of a public offering, the drawer of the security publishes the most important characteristics of the securities to be put on the market (number of units, face value, issue price, duration of the subscription, in the case of bonds, interest, maturity, etc.). In addition to these, the public offering also includes the availability of information for investors. After the public offering, the securities may be subscribed. 

Underwriting is a process whereby potential investors make an irrevocable commitment to purchase. This means acceptance of the offer announced in the public offering. They undertake to purchase the listed quantity of the paper in circulation at the indicated price.

It may happen that more or less subscriptions are received than the amount of paper indicated by the issuer. In this case, oversubscription or undersubscription occurs. In case of oversubscription, the securities are distributed among the underwriters as described in the public offering.

Underwriting is usually a bad sign. It indicates that the issuer and its financial advisor did not adequately measure the "appetite" of the market. The conditions under which it is advisable to offer the securities for issue were not well estimated. In case of undersubscription, it may also happen that the issuer abandons its intention and the issue is closed unsuccessfully.