Legal Definitions - negotiated offering

A negotiated offering is a method by which a company, government entity, or other organization sells new securities (such as stocks or bonds) to investors. In this process, the issuer (the entity selling the securities) directly selects an investment bank or a syndicate of banks to act as the underwriter. Instead of inviting multiple banks to submit competitive bids for the offering, the issuer and the chosen underwriter work together to negotiate and agree upon all the key terms of the sale. These terms typically include the price of the securities, the number of shares or bonds to be sold, the timing of the offering, and the fees the underwriter will receive for their services. This collaborative approach allows for a customized strategy, often chosen when an issuer values a specific underwriter's expertise, market insight, or existing relationship.

• Example 1: A Tech Startup's Initial Public Offering (IPO)
  InnovateTech Solutions, a rapidly growing software company, decides to go public to raise capital for expansion. Instead of soliciting bids from various investment banks, InnovateTech chooses to work exclusively with Global Market Advisors, an investment bank known for its deep expertise in the technology sector and its strong network of institutional investors. InnovateTech and Global Market Advisors then engage in extensive discussions to determine the optimal offering price for the shares, the total number of shares to be sold to the public, and the underwriting fees Global Market Advisors will earn. They collaboratively strategize on market timing and investor targeting to ensure a successful IPO.

  This illustrates a negotiated offering because InnovateTech directly selected Global Market Advisors and worked with them to agree on all the terms of the IPO, rather than having banks compete against each other with fixed bids.

• Example 2: A Utility Company Issuing New Bonds
  Evergreen Power Corporation, a large public utility, needs to raise funds for a new renewable energy project. Evergreen Power has a long-standing relationship with Capital Bridge Securities, an investment bank with significant experience in the utility sector. Evergreen Power decides to engage Capital Bridge Securities directly to manage its new bond offering. Together, they negotiate the interest rate (coupon) the bonds will pay, the maturity date, the total principal amount of the bonds to be issued, and Capital Bridge's compensation for underwriting the sale. Capital Bridge provides market insights and helps structure the offering to appeal to bond investors.

  This is an example of a negotiated offering because Evergreen Power chose to work directly with Capital Bridge Securities, negotiating the specific financial terms and conditions of the bond sale based on their mutual agreement and Capital Bridge's specialized advice, rather than conducting a competitive bidding process among several banks.