Gross Spread
Investment Banking glossary · Restructuring (RX), DCM, & ECM
Definition
Underwriter compensation in an IPO, expressed as a percentage of gross proceeds — typically 3-7% (higher for smaller deals; ~7% has been the de facto standard for sub-$500M IPOs). Allocated three ways: management fee (~20%, divided by economics among bookrunners), underwriting fee (~20%), and selling concession (~60%, paid to whichever syndicate members actually placed the shares). Direct listings eliminate the gross spread entirely.
Gross Spread in plain English
When a company goes public (an IPO), it hires investment banks to price the shares, drum up buyers, and manage the whole circus — and the gross spread is simply the banks' fee for that work, taken as a slice of the money raised. It usually runs about 3% to 7%, and for smaller IPOs (under about $500 million) roughly 7% has been the unofficial going rate. That fee gets split into three buckets: a management fee for running the deal, an underwriting fee for taking on risk, and the biggest chunk — the selling concession — which rewards whichever banks actually found buyers for the shares. If a company skips the banks and lists its shares directly on the market instead, there's no gross spread to pay at all.
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