The phrase "best efforts" is commonly used in the securities industry and refers to the level of effort that an underwriter of a securities offering will expend in order to sell the securities. In a best efforts offering, the underwriter agrees to use its best efforts to sell the securities, but does not guarantee that all of the securities will be sold.
What is best effort offering?
A best effort offering is an IPO in which the investment bank agrees to sell as much of the company's stock as possible, but does not guarantee that all of the shares will be sold. This type of offering is typically used when the demand for the stock is expected to be high, but the exact amount of demand is unknown. How do you use best effort basis in a sentence? A best effort basis means that the company making the offering will do its best to sell the securities, but is not guaranteeing that all of the securities will be sold.
What does best effort support mean?
When a company first offers its shares to the public, it does so through an initial public offering (IPO). In order to ensure that the IPO goes smoothly, the company hires an investment bank to act as its underwriter. The underwriter's role is to assess the demand for the company's shares and to set a price that will ensure that the shares are sold.
In order to protect itself, the underwriter will often require that the company agree to a best-effort support agreement. This agreement requires the company to use its best efforts to ensure that the shares are sold. If the shares are not sold, the underwriter may be forced to buy them back at a loss. Which of the following best defines the term best efforts underwriting? The term best efforts underwriting refers to an agreement between an investment bank and a company that is planning to go public. Under this agreement, the investment bank agrees to use its best efforts to sell the company's shares to the public. This type of underwriting is also known as a firm commitment underwriting.
Do underwriters face the most risk from a best efforts IPO a firm commitment IPO or an auction IPO? Underwriters face the most risk in a best efforts IPO because they are not guaranteed to sell all of the shares. In a firm commitment IPO, the underwriter is contractually obligated to purchase all of the shares and then resell them to investors. In an auction IPO, the underwriter is typically not involved in the actual sale of the shares and only provides advice to the issuer.