Page 169 - Initial Public Offering - An Introduction to IPO on Wall Street

10.2.1 Leader
The lead underwriter activates and handles the underwriting syndicate for the new issue. The
lead underwriter is an investment bank entrusted with managing the IPO on behalf of the
issuing business. It heads a syndicate of other investment banks that help to bring the IPO to
the market

The IPO is offered to large buyers, such as institutional organizations and retail customers,
with considerable resources to spend after the offering has been advertised. A large
percentage of the benefits for taking care of the underwriting process is received by the lead
underwriter in the syndicate.

It is the responsibility of the leader to make sure that the company complies with all FINRA
or SEC regulatory standards. Additionally, the lead underwriter assigns stocks, as per their
financial capacity and priorities, to each participant of the syndicate. Moreover, it takes
charge of the negotiations regarding the price and timing of the offering.

There is generally a lot of hype around the offer during the issue, which raises the demand for
the stocks. The lead underwriter uses the increased demand to their advantage by producing an
over-allotment, resulting in money for the investor and more profits for the investment bank
heading the issue.

The lead underwriter's main duty is to assess the final price of the offering. It is crucial to set
the right price as this will impact how easy or difficult it will be to sell the shares to prospective
buyers. The price would also decide how much money is earned from the issue by the issuer
of the stock and the syndicate.

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