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Issuers and underwriters

In the world of securities, issuers and underwriters play crucial roles in the process of bringing new securities to market through initial public offerings (IPOs) or other offerings.

1. Issuers

  • Jurisdiction: Issuers are companies or entities that create and offer securities (stocks, bonds, etc.) to raise capital for business operations, expansion, or projects. They are responsible for complying with regulations and disclosing necessary financial information to investors.
  • Example: Uber Technologies was the issuer when it went public in 2019, offering Uber shares to the public through an IPO to raise funds for its global expansion. As part of the IPO process, Uber had to file a prospectus with the SEC, detailing its financial health and business model.

2. Underwriters

  • Jurisdiction: Underwriters are typically investment banks or financial institutions that assist issuers in the process of offering securities to the public. They manage the issuance process, help price the securities, and sometimes purchase the securities to sell them to investors.
  • Example: For Uber's IPO, Goldman Sachs, Morgan Stanley, and other major banks acted as underwriters. These firms helped Uber determine the IPO price, managed the sale of shares, and guaranteed the sale of a minimum number of shares. In case of any shortfall in demand, underwriters would step in to buy the securities and ensure the success of the offering.

Key Functions

  • Issuers raise capital by offering securities.
  • Underwriters provide expertise, pricing guidance, and market access to ensure the success of the offering.

In summary, issuers create securities to raise capital, while underwriters help facilitate the process by pricing, promoting, and sometimes purchasing the securities, ensuring the offering goes smoothly.

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