Firm Commitment Underwriting

Definition:

A guarantee by an underwriter or an initial purchaser to purchase all of the securities being offered by a company at an agreed-upon price with the securities to then be sold to the public and/or Institutional Investors. The underwriter assumes the risk that it may not be able to resell all of the securities to the public and, in such circumstances, is forced to keep them for their own account. For the issuer, this is the safest but most expensive type of initial sale of securities.

Also known as a Bought Deal or a Firm Commitment Offering.

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