
Re-Offer Price
A re-offer price is the price at which the underwriting syndicate of a debt issue re-sells the bonds or IPO securities to public investors after receiving them in the primary market directly from the issuers. Their profits come from the advisory fee, which is a percentage of the offering size, and the difference between the purchase price and the re-offer price. Fixed price re-offer is a practice of underwriting syndicates strongly enforced in the U.S., where underwriting investment banks agree to sell bonds to investors for no less than an agreed price. A re-offer price is the price at which the underwriting syndicate of a debt issue re-sells the bonds or IPO securities to public investors after receiving them in the primary market directly from the issuers. The re-offer may be higher, lower, or the same price as the initial offering price depending on prevailing market conditions and the financial health of the issuer at that time - although the goal for the underwriter is to get a higher price than what they paid directly. The re-offer price is that price point at which an investment bank offers bonds or other securities that it has itself purchased directly from an issuer to the public.

What Is a Re-Offer Price?
A re-offer price is the price at which the underwriting syndicate of a debt issue re-sells the bonds or IPO securities to public investors after receiving them in the primary market directly from the issuers. The syndicate will purchase the bonds for a specified amount from the issuing firm and re-offer the bonds or securities to the public, usually at a different price.




Re-Offer Price Explained
An underwriting investment bank may facilitate a debt issue by agreeing to directly purchase all of the bonds or securities for a price at or below face value, in what is called a primary market transaction. Having the underwriters purchase the entire bond issue, instead of passing the sale immediately onto the public, removes the company's risk of not selling the entire issue. The investment banker will then re-sell the bonds to public investors at a re-offer price on the secondary market, which may be above (at a premium) slightly below (at a discount) par value.
In a serial issue, most common to municipal general obligation (GO) bonds, the first bonds to mature are frequently at a premium with a higher coupon rate. The last bonds to mature in the offering are sometimes sold at a discount, but carry a lower coupon rate.
How Re-Offer Prices Work
Before it sells bonds or securities to the public, a company first needs an investment banker to underwrite the issue. The job of the underwriter is to raise capital for the issuing company. The underwriter accomplishes this by purchasing the securities from the issuing corporation at a predetermined price and reselling them to the public for a profit. The re-offer price is that resale price.
In most cases, a single investment banking firm takes the lead role in setting up an IPO or bond issue. This lead firm is known as the managing underwriter, and it often forms an underwriting syndicate to participate in the sale. This syndicate, in turn, may gather an even larger group of broker-dealers to help with the distribution of the new issue. Their profits come from the advisory fee, which is a percentage of the offering size, and the difference between the purchase price and the re-offer price.
Fixed Price Re-Offers
Fixed price re-offer is a practice of underwriting syndicates strongly enforced in the U.S., where underwriting investment banks agree to sell bonds to investors for no less than an agreed price. This pricing scheme is usually used to sell to institutional investors. The fixed price is usually available for 24 hours after the offering starts. This practice ensures transparency in the primary market. Investors know they cannot get the bonds cheaper from another dealer while the issue is in syndication. For the issuer, the fixed price re-offer method has the advantage of lower underwriting fees.
Related terms:
Bought Deal
A bought deal is a securities offering in which an investment bank commits to buy the entire offering from the client company. read more
Capital Markets
Capital markets are venues where savings and investments are channeled between suppliers and those in need of capital. read more
Debt Issue
A debt issue is a financial obligation that allows the issuer to raise funds by promising to repay the lender at a certain point in the future. read more
General Obligation (GO) Bond
A general obligation (GO) bond is backed by the credit and "taxing power" of the issuing jurisdiction rather than the revenue from a given project. read more
Investment Banker
An investment banker is an individual who is primarily concerned with raising capital for corporations, governments, or other entities. read more
Net Interest Cost (NIC)
Net interest cost (NIC) is a mathematical formula that an issuer of bonds uses to compute the overall interest expenses that are payable on their bonds. read more
Par Value
Par value can refer to either the face value of a bond or the stock value stated in the corporate charter. read more
The Pot
The pot is the portion of a stock or bond issue that investment bankers return to the managing or lead underwriter. read more
Primary Market
A primary market is a market that issues new securities on an exchange, facilitated by underwriting groups and consisting of investment banks. read more
Secondary Market
A secondary market is a market where investors purchase securities or assets from other investors, rather than from issuing companies themselves. read more