Underwriting Risk

While some people are amazed at the money earned for underwriting stock offerings, it can be a risky business. Credit Suisse recently underwrote a 10 million share secondary offering for Canada Goose, known for its expensive coats and parkas. When the offering was made, in an unrelated incident, Huawei Technologies finance chief was arrested in Vancouver, sparking a diplomatic dispute between Canada and China. The arrest led to a Chinese boycott of Canadian brands, sending Canada Goose shares down by 20 percent. Credit Suisse was forced to sell the shares at a loss to the offering price or risk a further decline in the stock price. Reportedly, Credit Suisse lost $60 million on the transaction.