Series 79: Selling Concession

Selling Concession

The selling concession is usually 60% of the gross spread. The concession compensates the managing underwriters and syndicate and selling group members for selling the shares to investors. Whichever party sells the shares receives the selling concession. The selling concession fee is typically divided among the sellers as a pre-determined, fixed percentage, or a competitive component may be incorporated.

Note that while the 20/20/60 division is standard, it is not universal. The AAU may specify a different division.

Example: As an example of how the spread is divided, consider the hypothetical IPO of Acme Lye and Steel, an industrial materials company. It will issue 10 million shares. The IPO is priced at $14 per share, with a typical 7% u