Bought Deal
A bought deal is a firm-commitment financing in which underwriters agree to purchase an issue before completing its resale to investors.
Compare bought deals, placements, and divided or undivided underwriting accounts by commitment, distribution method, and residual risk.
Bought deals, placements, and underwriting accounts describe different parts of a securities distribution. A bought deal addresses when an underwriter commits to purchase an issue. A placing or placed deal addresses how securities reach selected investors. Divided and undivided accounts address how syndicate members allocate residual securities among themselves.
These labels are not interchangeable. A placing can be underwritten or non-underwritten, and a bought deal can use a syndicate with an undivided account. The prospectus, placing agreement, underwriting agreement, and agreement among underwriters determine the actual obligations.
| Question | Relevant term | What it tells you |
|---|---|---|
| Who commits capital before investor resale? | Bought Deal | Underwriters buy the securities on a firm-commitment basis under the negotiated agreement |
| How are securities distributed to investors? | Placing or Placed Deal | Securities are marketed or allocated to selected investors rather than necessarily offered broadly |
| How does a syndicate share unsold liability? | Divided vs. Undivided Accounts | Compare responsibility for a member’s own allotment with an agreed share of the syndicate’s residual |
“Placed deal” and “placing” are market-language terms whose use varies by jurisdiction and transaction. Neither label alone establishes whether the offering is registered, prospectus-exempt, primary, secondary, underwritten, or best efforts.
Suppose an issuer wants to sell 20 million new shares. A dealer can buy the entire block from the issuer and then place the shares with institutions. That transaction combines a purchase commitment with targeted distribution. Alternatively, the dealer can act only as agent, seek orders from selected investors, and earn a commission on the shares placed. That is a placement process without the same principal purchase risk.
Analysts should record both dimensions:
Assume an issuer proposes 20 million shares at a $5 public or placing price.
In a bought deal, the underwriters might agree to pay $4.75 per share for the entire block. The issuer receives $95 million before its other expenses, while the underwriters bear resale exposure after the purchase closes.
In a non-underwritten placing, an agent might place only 16 million shares at $5 and charge a 4% commission:
The example shows why “placing” does not answer the commitment question. The placement could instead be fully subscribed, underwritten, or subject to a minimum condition.
Ontario Securities Commission guidance on prospectus requirements explains the firm-commitment basis and restrictions associated with Canadian bought-deal agreements. The FCA’s current rules for further share issuances address placings by certain UK-listed companies, including pricing and announcement requirements. The applicable rules and exemptions depend on the issuer, security, venue, and transaction date.
This material is educational. Securities-offering terms are transaction- and jurisdiction-specific; rely on the governing documents and qualified legal, accounting, tax, and investment professionals.
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A bought deal is a firm-commitment financing in which underwriters agree to purchase an issue before completing its resale to investors.
An Eastern Account is older shorthand for an undivided underwriting account in which each syndicate member bears an agreed share of the overall residual.
A placed deal distributes securities to selected investors, but the label alone does not establish the regulatory route or underwriting commitment.
A placing distributes new or existing shares to selected investors, with pricing, underwriting, admission, and dilution determined by the transaction terms.