Categories: IPO

Hard Underwriting

Underwriters are the risk takers of any IPO as they guarantee the issue’s subscription in the event of undersubscription by investors. Hard underwriting is one of the ways that underwriters may cover for the issue subscription.

When the underwriters agree to buy or buy their commitment to the IPO at its earliest stage i.e., before the issue opens, this process is known as hard underwriting.

Hard underwriting is different from soft underwriting as the risk involved is significantly higher and in the latter case, underwriters agree to buy the shares at a later stage of the IPO, i.e, after it closes.

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