Securities underwriting refers to the act of the issuer entrusting a securities operation institution to publicly sell securities to the public. The issuer shall publicly issue securities to unspecified objects, and shall be underwritten by a securities company according to law. The securities underwriting business adopts the agency sales or underwriting method. Securities underwriting is the act of a securities institution acting as a securities issuer to issue securities. It is one of the most basic business activities of securities institutions.
Securities underwriting
According to the different responsibilities and risks assumed by the securities operation institution in the underwriting process, underwriting can be divided into four types: underwriting, bidding, agency sales and sponsorship.
Underwriting refers to the issuer's contract with the underwriting agency, and the underwriting agency buys all or sells the remaining portion of the securities and assumes all sales risks. Applicable to companies with large capital requirements, low social visibility and lack of securities issuance experience.
Bidding take-offs are usually carried out with investment banks being passively competitive. Securities issued in this form usually have higher credit and are welcomed by investors.
Consignment is generally formed by the investment bank's belief that the securities have a low credit rating and a high risk of underwriting. At this time, the investment bank only accepts the entrustment of the issuer and acts as its agent to sell the securities. If the securities issued within the prescribed time limit plan are not all sold out, the rest will be returned to the issuer of the securities, and the issue risk will be borne by the issuer.
Sponsorship promotion refers to when the issuing company increases its capital and shares, its main target is the current shareholders, but it cannot ensure that the existing shareholders subscribe for their securities. In order to prevent it from being difficult to raise the required funds in time, it may even cause the stock price of the company to fall. Companies generally entrust investment banks to handle the issue of new shares issued by prior shareholders, thereby passing the risks on to investment banks.
The "Company Law of the People's Republic of China" stipulates that a public limited company that publicly issues new shares to the public shall be underwritten by a securities operation institution established according to law and an underwriting agreement shall be signed. Underwriting includes two methods: underwriting and consignment. The underwriting agreement should specify the underwriting party. The underwriting period expires, and the shares that have not yet been sold are handled separately according to the underwriting or consignment method agreed upon in the underwriting agreement.
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