Gross spread
Encyclopedia
Gross spread refers to the fees that underwriters receive for arranging and underwriting an offering of debt
or equity
securities
. The gross spread for an initial public offering
(IPO) can be higher than 10% while the gross spread on a debt offering can be as low as 0.05%.
For example, if a company sells $100 million of shares in an IPO and the gross spread is 7%, the underwriting syndicate will receive fees of $7 million. These fees will be divided among the underwriters arranging the offering.
Debt
A debt is an obligation owed by one party to a second party, the creditor; usually this refers to assets granted by the creditor to the debtor, but the term can also be used metaphorically to cover moral obligations and other interactions not based on economic value.A debt is created when a...
or equity
Stock
The capital stock of a business entity represents the original capital paid into or invested in the business by its founders. It serves as a security for the creditors of a business since it cannot be withdrawn to the detriment of the creditors...
securities
Security (finance)
A security is generally a fungible, negotiable financial instrument representing financial value. Securities are broadly categorized into:* debt securities ,* equity securities, e.g., common stocks; and,...
. The gross spread for an initial public offering
Initial public offering
An initial public offering or stock market launch, is the first sale of stock by a private company to the public. It can be used by either small or large companies to raise expansion capital and become publicly traded enterprises...
(IPO) can be higher than 10% while the gross spread on a debt offering can be as low as 0.05%.
For example, if a company sells $100 million of shares in an IPO and the gross spread is 7%, the underwriting syndicate will receive fees of $7 million. These fees will be divided among the underwriters arranging the offering.