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Technology Stocks : WDC/Sandisk Corporation
WDC 169.55-0.2%Dec 9 3:59 PM EST
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To: Ausdauer who wrote (6724)8/24/1999 2:38:00 PM
From: Sam  Read Replies (1) of 60323
 
Aus,
These underwriters get a fee for placing the stock for Sandisk. That, indeed, is the biggest point of the stock market: to get money for companies that need it and don't want to go into debt by creating a marketplace for equity. Plus the underwriters get a double fee: If their clients just bought the stock in the open market, they would just get commissions on the buy. This way, they get both commissions on the buy and a piece of Sandisk's financial windfall. Sandisk gets more cash, underwriters get fees and commissions, their clients get risk, and the current stockholders get diluted but have the hope/confidence that the company's management knows how to invest the money to make the business more than the dilution (otherwise, you should not own the stock).

Hope that helps,
Sam
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