How does the size of an issue affect the fees charged by underwriters? Large iss

Question

How does the size of an issue affect the fees charged by underwriters?

Large issues have substantially larger direct costs and, thus, must charge a larger spread in order to be profitable for the underwriter.

Large issues generally have a similar spread to small issues and thus attract much greater fees.

Large issues have a reduced spread, which means that the total fees are generally the same as for smaller issues.

Although large issues generally have a smaller spread, the large number of shares released means that the total fees are somewhat larger than for smaller issues.

Large issues have substantially larger direct costs and, thus, must charge a larger spread in order to be profitable for the underwriter.

Large issues generally have a similar spread to small issues and thus attract much greater fees.

Large issues have a reduced spread, which means that the total fees are generally the same as for smaller issues.

Although large issues generally have a smaller spread, the large number of shares released means that the total fees are somewhat larger than for smaller issues.

Explanation / Answer

In general the larger the issue the fees charged will be less due to higher negotiating power of the issuer. However the amount of fee will be larger compared to a smaller issue due to the size of the issue. Hence the correct answer is

Although large issues generally have a smaller spread, the large number of shares released means that the total fees are somewhat larger than for smaller issues.                                     

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