# Underwriter > An investment bank that manages a securities offering, buys the shares from the issuer and resells them to investors, earning a fee called the spread. Source: https://www.quantisnow.com/glossary/underwriter Topic: Glossary / IPOs and offerings Also known as: IPO underwriter, lead underwriter, bookrunner, book-running manager, underwriting syndicate Last updated: 2026-10-27 An underwriter is an investment bank or broker-dealer that manages a securities offering, such as an [IPO](https://www.quantisnow.com/glossary/ipo) or follow-on offering, by helping prepare the registration statement, marketing the deal, setting the price and distributing the securities to investors. ## How it works Large deals have a syndicate: one or more lead bookrunners who run the book and allocations, plus co-managers who help with distribution. In a firm commitment underwriting, the banks buy the entire offering from the issuer at a discount and resell it to investors at the public offering price, taking the risk of unsold shares. In a best efforts deal, common for very small offerings, the bank acts as an agent and only sells what it can. The underwriting discount, or gross spread, is the difference between the public price and what the issuer receives. For mid-sized US IPOs it has historically been around 7%, and lower for very large deals and follow-ons. Underwriters also negotiate the [lock-up](https://www.quantisnow.com/glossary/lock-up-period) with insiders, hold the [greenshoe option](https://www.quantisnow.com/glossary/greenshoe-option), and their research arms typically initiate coverage after the [quiet period](https://www.quantisnow.com/glossary/quiet-period). ## Why it matters for traders The identity of the underwriters signals deal quality. Major bulge-bracket banks tend to lead larger, more established IPOs, while small-cap offerings often use specialty firms. In microcap financings, repeated deals with the same small placement agent frequently come with warrants and steep discounts. Underwriters' coverage initiations are usually positive, so many traders discount them, but they still often move stocks. ## Example Hypothetical Northwind Cloud (NWCL) sells 10 million shares in its IPO at $22 per share, $220 million gross. The underwriters' 7% gross spread is $1.54 per share, or $15.4 million in total, so NWCL receives $204.6 million before other expenses. ## FAQ ### What does an underwriter do in an IPO? It helps prepare the filing, markets the deal to investors, sets the price with the company, allocates shares and supports trading through the greenshoe. ### How do underwriters get paid? Mainly through the gross spread, the discount at which they buy shares from the issuer compared with the public offering price. ## Related terms - [Initial public offering (IPO)](https://www.quantisnow.com/glossary/ipo.md): The first sale of a private company's shares to the public, after which the stock lists and trades on an exchange such as Nasdaq or the NYSE. - [IPO pricing](https://www.quantisnow.com/glossary/ipo-pricing.md): The process by which a company and its underwriters set the final per-share price and size of an IPO, usually the evening before trading begins. - [Greenshoe option (over-allotment)](https://www.quantisnow.com/glossary/greenshoe-option.md): An underwriter's option to sell up to 15% more shares than planned in an offering, used to stabilize the price after trading begins. - [Lock-up period](https://www.quantisnow.com/glossary/lock-up-period.md): A contractual window after an IPO or offering, commonly 180 days, during which insiders and early investors agree not to sell their shares. - [Follow-on offering](https://www.quantisnow.com/glossary/follow-on-offering.md): A sale of additional shares by a company that is already public, used to raise more capital or let existing holders sell stock. - [Quiet period](https://www.quantisnow.com/glossary/quiet-period.md): A stretch when a company or its underwriters limit public communication, most often around an IPO or in the weeks before an earnings release. ## On Quantisnow - [The IPO lifecycle](https://www.quantisnow.com/guides/ipo-lifecycle) - [IPO calendar](https://www.quantisnow.com/ipos) - [Live feed: Offerings](https://www.quantisnow.com/news/offerings) - [Form S-1 and IPO filings](https://www.quantisnow.com/guides/form-s-1-and-ipo-filings)