In an initial public offering (IPO), the gross spread is the difference between what the underwriters pay the issuing company per share and the per share price that investors pay. It's usually about 7%.
For example, if a stock is to be offered to the public at $10 a share, the underwriters may pay the issuing company around $9.30 per share. With millions of shares being sold, the 70 cents per share adds up to millions of dollars for the investment bank.
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