TLDR:
In finance, an underwriter is an investment bank or broker-dealer that helps companies issue securities, guaranteeing the sale of shares at a set price and assuming the risk of distributing unsold shares.
Underwriters in IPO Mechanics
In an IPO, the underwriting syndicate typically consists of a lead left bookrunner (most prestigious, largest allocation), co-lead underwriters, and syndicate members. Each has different roles and economic compensation. The lead bookrunner manages the investor roadshow, builds the order book, determines final pricing in consultation with the company, and allocates shares to investors. Underwriting fees (the ‘gross spread’) typically total 5-7% of proceeds for large US IPOs, split among syndicate members according to pre-agreed allocation formulas.