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← Series 79: Underwriting & New Financing
Series 79 practice questionmediumSyndicate Formation

What is the primary reason an issuer might select multiple joint bookrunners for a large IPO?

  1. AThe SEC requires a minimum of three underwriters for offerings over $500 million
  2. BTo avoid the requirement of a roadshow
  3. CTo reduce the underwriting spread to zero
  4. DTo access a broader distribution network and diverse institutional investor relationships across multiple firms✓ Correct answer
Explanation

Why D — To access a broader distribution network and diverse institutional investor relationships across multiple firms

Having multiple joint bookrunners allows the issuer to leverage the distribution capabilities, research coverage, and institutional investor relationships of each firm, which can result in broader demand and better pricing. Different banks may have stronger relationships with different types of investors or in different geographies. While having more bookrunners may also create competitive tension that benefits pricing, the primary motivation is maximizing distribution reach for the offering.

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