Securities underwriting is the most primitive and basic business activity of investment banks. Investment banks have a wide range of underwriting rights, including bonds issued by the central government, local governments and government agencies, stocks and bonds issued by enterprises, securities issued by foreign governments and companies at home and abroad, and securities issued by international financial institutions. In the process of underwriting, investment banks generally have to weigh whether to form an underwriting syndicate and choose the underwriting method according to the underwriting amount and risk. There are four common underwriting methods:
First kind
Underwriting means that the lead underwriter and its members agree to buy all the issued securities at the agreed price and then sell them to their customers. At this time, the issuer does not bear the risk, and the risk is passed on to the investment bank.
The second type
Bidding and purchasing. Usually when investment banks are in strong passive competition. Securities issued in this way are usually high-credit bonds and are welcomed by investors.
The third kind
Consignment This is usually because investment banks believe that securities have low credit rating and high underwriting risk. At this time, the investment bank only accepts the entrustment of the issuer to sell securities on its behalf. If all the securities issued within the prescribed time limit plan are not sold, the remaining part shall be returned to the securities issuer, and the issuer shall bear the risk of issuance. So investment banks can buy and sell.