What type of underwriting assures that the issuing corporation receives the full amount of the offering and retains any unsold shares?

In firm commitment underwriting, the underwriter guarantees that the issuing corporation will receive the full amount of the offering proceeds. This is done by purchasing the entire issue of securities from the issuer and then reselling them to the public. This arrangement provides certainty for the issuing corporation, as it ensures they get the necessary funds regardless of how well the securities sell in the market.

An essential aspect of firm commitment underwriting is that the underwriter takes on the risk of any unsold shares. If the underwriter cannot sell all the shares, they will still be obligated to pay the issuer for the full amount. This distinguishes firm commitment from other types of underwriting, where the risk might be shared or laid solely on the issuer.

Thus, the effectiveness of this underwriting type creates a strong partnership between the issuing corporation and the underwriter, promoting confidence in the capital-raising process. In contrast, other options like best efforts underwriting do not assure the issuer of the full proceeds, as the underwriter only sells what it can. All-or-none underwriting comes with a condition that the entire issue must be sold or it will be canceled, which is different from firm commitment. Contingency offerings involve conditions that must be met before the offering is finalized, adding another layer