Underwriting Spread

Difference between the amount paid to an issuer in a primary distribution and the public offering price. The spread amount varies and is contingent on the issue's size, the issuer's financial strength, the type of security (stock, bonds, etc.), the status of the security (senior, junior, etc.), and the type of commitment made by the underwriters. The spread may range from a fraction of 1% for a bond issue to 25% for an initial public offering of a small company. The spread is divided between the managing underwriter, the selling group, and the participating underwriters.