Hard Underwriting
Hard underwriting occurs when the underwriter agrees to purchase their allocated share of stock before the IPO opens. This means the underwriter is committed to buying the entire portion of the shares they are responsible for, regardless of whether they are sold to the public. In contrast, in a regular underwriting process, the underwriter is only liable to purchase any unsold shares after the IPO opens. This makes hard underwriting riskier for the underwriter but provides more certainty for the issuing company, as it guarantees that the company will receive the funds raised from the IPO.
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