"the weakest form of underwriting, because the underwriter agrees to do the best he can to sell the issue but does not guarantee that if he cannot sell the issue, he will purchase for his own account any unsold securities." The second is the "All or None" type which, continues the Globus pamphlet, "implies that the underwriter will sell the issue completely or return any monies collected from the public and cancel the underwriting if a sale cannot be effected." The third is the "Firm Commitment" type, in which "the underwriter guarantees to purchase the agreed upon financing whether or not he can resell same to the public. This is the strongest form of underwriting and is used only by top underwriting companies." So if the underwriter, who probably should know what he is doing, makes a firm commitment to buy the whole issue for his own account in case of necessity, there appears comparatively little risk for the investor in buying the stock at offering or slightly above offering. In order for an underwriter to make that kind of commitment, he must be very selective in his choice of companies being underwritten.


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