ShmoopTube

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finance a la shmoop what is a managing underwriter

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and what is the selling group well the managing underwriter isn't just a person

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it's a group and it's very different from this guy the managing Undertaker [Gravestones appear]

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after that Ebola outbreak well the key word here is managing in

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that the manager is the backstop the fiduciary the risk taker the one who

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loses his shirt should the offering go awry in a way that can be proven in a [Hoover sucks shirt off man]

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court of law with 12 angry jurors that it was the

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evil banks fault specifically the managing underwriter is

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the QB in a securities offering such that the company designates this group

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as their primary point of contact in selling a chunk of themselves or raising

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debt from the kindly loving mutual and hedge fund investors on Wall Street at [Person holding cup on Wall Street]

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issue is risk when an underwriting happens usually for a few brief moments

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in time the managing underwriter actually owns the shares that it's [Pile of stocks appear]

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offering to the public or whoever's buying them it buys them at some

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discount from the company you know something like oh no 24 bucks a share

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and then turns around and sells them for 25 bucks a share a few minutes later

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making a nice living on that dollar spread for 20 million shares that they

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just placed well they don't keep all this money there are usually other

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underwriters not managing the process involved in the sale of the securities [Underwriters appear]

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to the street so they get their piece of the offering this other group is called

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the selling group and they essentially work under the direction of the managing

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underwriter and serve a very simple but important role in getting early [Cash transfers to selling group]

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commitments for mutual and hedge funds to buy a given volume at a given price

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at a given level of certainty you know all else being equal think of the

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selling group as a gaggle of ex cheerleaders and football quarterbacks [Cheerleaders and football players appear on a field]

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who were a hundred SAT points smarter than the average realtor they just get

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their selling commission and they don't split anything off the top in the way

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the managing underwriter does and a typical set of slits might designate the

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managing underwriter is getting 15% of the gross sales of the offering off the

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top before anyone else gets anything in this case the managing underwriter would

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get in a 15% of that 20 million-dollar spread or 3 million bucks and more or

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less just for showing up they might then get

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third piece of the remaining 85% or 17 million bucks to sell that than to the [Piechart appears for gross sales]

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street and that five or six million dollars generally goes directly to their

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sales force in return for winning the hundred-meter client ass-kissing at the [Men running on a track]

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annual buy-side fair keeping good relationships with buyers is oddly an

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entire career in Wall Street today purposely missed putts on the golf [Golfer putting a ball]

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course aggressive fawning about their butt hair

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looking hair transplants that make the portfolio manager truly look 21 again [Guys look at man with hair transplant]

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and other officious acts while they're all part of this lucrative sales job on

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Wall Street and it's a great gig if you have thick skin and you know very [Elephant in a field]

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puckery lips

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