Underwriting

As applied to corporate stock, an underwriting agreement is an agreement made before such stock is offered to the public whereby the signer, or "underwriter'' agrees for a certain compensation to take a stipulated number of shares of stock, or a portion thereof, if the public does not subscribe for or take all of such stock. The same definition applies to the underwriting of corporate bonds, and it is an agreement by the subscribers, based on a consideration, to insure the sale of the bonds subscribed at a stipulated price, and, if they are not sold to others, that the subscribers will purchase and pay for them at the price fixed therein. It has been held that an underwriting in this sense is a purchase together vrith a guaranty of a sale of the bonds.

Fletcher Cyclopedia Corporations 950.