Listen to a Business English Dialogue About Negotiated underwriting
Aubrey: Hey Craig, have you heard of negotiated underwriting in finance?
Craig: Hi Aubrey! Yes, negotiated underwriting is when an issuer selects an underwriter or a group of underwriters to sell its securities, and they negotiate the terms and conditions of the offering.
Aubrey: That’s right, Craig. Unlike competitive bidding, where the underwriter with the lowest bid wins, negotiated underwriting allows for more flexibility in pricing and structuring the offering.
Craig: Exactly, Aubrey. Negotiated underwriting is often used for complex securities or when the issuer wants more control over the process and the selection of underwriters.
Aubrey: Right, Craig. It’s commonly seen in municipal bond offerings, corporate bond issuances, and initial public offerings (IPOs) of stock.
Craig: Absolutely, Aubrey. Negotiated underwriting can benefit both the issuer and the underwriters by allowing for a tailored approach to the offering and ensuring that the securities are sold at a fair price.
Aubrey: Indeed, Craig. It also enables the issuer to work closely with the underwriter to determine the optimal timing, pricing, and marketing strategy for the securities.
Craig: That’s correct, Aubrey. However, negotiated underwriting may involve higher fees for the issuer compared to competitive bidding, as it requires more extensive collaboration and customization.
Aubrey: Absolutely, Craig. Nevertheless, negotiated underwriting can be advantageous for issuers seeking a more personalized approach and greater control over the offering process.
Craig: Right, Aubrey. Overall, negotiated underwriting provides flexibility and customization options for issuers, helping them achieve their financing goals effectively and efficiently.
Aubrey: Indeed, Craig. It’s an important aspect of the capital markets that allows companies and governments to raise funds in a manner that best suits their needs and objectives.