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  • Monday, April 28, 2025
  • The Financial Encyclopedia
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Investment Banking

  Investment Banking   |   Terms
  • 937
  • May 30, 2020
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Best Effort

An underwriting agreement in which the investment bank serves as agent in selling stock on behalf of the issuer. That is, the underwriter commits to exercise its best efforts to sell a specified amount of initial public offering (IPO) shares to the public. The underwriter doesn’t purchase stock directly, and thus takes no risk in relation to any unsold stock. However, it runs the risk of losing rights to stock and other commissions should it fail to sell the specified amount of shares. Best effort agreements typically include a provision that entitles the underwriter terminate the IPO if its best effort doesn’t live up to expectations.


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