Types of Underwriting

All-or-none underwriting (AON)

A form of best efforts underwriting in which the underwriter agrees that if it is unable to sell all the shares (or a prescribed minimum), the issuer will cancel the offering. This type of agreement may be used when the issuer requires a minimum amount of capital to be raised; if the minimum is not reached, the securities sold and the money raised are returned. Commissions are not paid unless the offering is completed.

Mini-Max Underwriting

The underwriter agrees to sell a minimum number of shares. There is also a maximum dollar amount of securities the issuer is willing to sell

firm commitment underwriting

the type of underwriting in which the underwriter buys the entire issue, assuming full financial responsibility for any unsold shares (underwriter acting as principal)

Best Efforts Underwriting

the type of underwriting in which the underwriter sells as much of the issue as possible, but can return any unsold shares to the issuer without financial responsibility (underwriter not at risk)