Underwriting: what exactly is the point?

Jenny Ruth
Wed, 21 Nov 2018

Nov. 22 (BusinessDesk) - Observers of recent rights issues may wonder why such heavily discounted share sales need to be underwritten.The bog standard reason – or excuse? – is that companies, or their bankers, want certainty that they’ll get the money they need.But a number of recent outcomes raise questions about whether there was much uncertainty to start with.Take Fletcher Building’s $750 million one-for-4.46 rights issue announced in April; the new shares were priced at $4.80 when the day before the shares ended trading at $6.27, so a 23.4...

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