Question

If an investment banker wanted to take on the risk of a initial public offering not...

If an investment banker wanted to take on the risk of a initial public offering not doing well, he would tell the company issuing securities that he would make a "Best Efforts" sale of the securities.

Group of answer choices

True

False

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Answer #1

In the best effort agreement, the underwriter will be assuring the firm that he will make it best effort in order to sell the security to the public but he will not guarantee it, because in the event, if the issue is not completely subscribed, the underwriter will not be taking the risk of subscribing it, whereas in normal underwriting, investment banker will be having the risk of under subscription by the public and he will have to pay the full price to the company.

The given statement is FALSE.

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