Section 9: Underwriting

Section 9: Underwriting

a. Concept Underwriting is the process of a securities firm helping organizations release the procedure done before and after the offering of securities such as stock valuation, preparation of applications for the issuance of securities, distribution distribution of securities and comment ...

a. Concept

Underwriting is the process of a securities firm helping organizations release the procedure done before and after the offering of securities such as stock valuation, preparation of applications for the issuance of securities, distribution of Stock and stock price stability during dau.Thong often, to issue securities to the public, the issuer should have been the guarantor of a small company, and the release number is not large, the just an underwriting organization. If it's a large company, and the number of securities issued beyond the capacity of an organization, the need to guarantee a combination of underwriting, including an organization or a major sponsor and some underwriting organization members.

 The organization underwriting underwriting fee or receive a certain percentage of commission on the proceeds from the issuance. Underwriting fee is the difference between the selling price of securities to investors and issuers of money received.

 For example, if the stock buying public to pay 20,000 dong per share, while the company received 18,000 e issuing a stock, the underwriting fee is VND 2,000 per share.

 Underwriting fee or commission is guaranteed high or low depending on the nature of the issue (large or small, favorable or difficult). In general, if the issue is that the issuance of securities to the public for the first time the fee or commission to distributors times higher than primary. For bonds, underwriting fee or commission dependent on bond yields (interest rates low, bond underwriting fees must be high and vice versa)

 B. Characteristics of underwriting method

 The underwriting is done by one of the following methods:

- Guarantee with firm commitments: the method by which the guarantor guaranteeing organization committed to purchase all issued securities whether or not distributed.

- Guarantee the best efforts: the method by which the guarantee institutions guarantee agreement as agent for the issuer. Organization underwriting commitments do not sell all of the securities pledged to try to sell the securities to the market but not distributed will be returned to the issuer.

 - Guarantees all manner sell or not to sell anything: a guaranteed method by which issuers instructed underwriting organization if not sold out of stock, then cancel the entire issue .

 Thus, underwriting methods are completely different methods in an attempt to guarantee the highest. In underwriting methods before, there can be only one part of securities sold, still in underwriting method or is this all stock is sold out or canceled and the whole issue of money securities sold is returned to the buyer.

 - Guarantee the method minimum - maximum guaranteed method is intermediate between methods in an attempt to guarantee the highest and guaranteed method of selling all or does not sell anything. Under this method, the issuer held instructed underwriters to sell at least a certain percentage of issued securities. If the amount of securities sold at less than the rate required, the entire issue will be canceled.

 In Vietnam, as stipulated in the Circular dated 13.10.1998 01/1998/TT-UBCK guidance of the State Securities Commission Decree 48/1998/ND-CP dated 07/11/1998 on the issue of shares, bonds to the public, the underwriting is done by one of the following methods:

- Buy the whole number of shares or bonds to be issued for resale. This is the firm commitment method for underwriting organizations committed to purchase all shares or the issuance of bonds. - Buy some stocks or bonds remaining issue was not distributed This is essentially all a form of firm commitment method, but held underwriting commitment to purchase the remaining stock of the issue has not been distributed.

Part 1: Summary of Stock

Part 2: Introduction to stocks

Part 3: Introduction to Bonds

Part 4: Stock may convert

Part 5: Derivatives

Part 6: Primary Market

Part 7: First Issue of securities to the public (IPO)

Section 8: Process initial issuance of securities to the public

Section 9: Underwriting