In a bought deal follow-on offering, what commitment do underwriters make?

In a bought deal follow-on offering, underwriters make a significant commitment by agreeing to purchase all shares from the issuing company at a predetermined set price. This structure provides the issuing company with certainty regarding the amount of capital it will raise because the underwriters assume the risk of selling the shares to investors later.

By locking in the purchase price, underwriters ensure that the company receives the agreed-upon funds regardless of subsequent changes in market conditions. This arrangement is advantageous for the issuing company, as it allows for quick access to capital and minimizes the uncertainty associated with market fluctuations. The underwriters then take on the responsibility to resell these shares to the market, aiming to do so at a profit while managing the inherent risks of market demand.

In this context, the other options do not accurately describe the nature of a bought deal follow-on offering. Underwriters do not guarantee sales at market prices or only purchase shares after assessing market demand, as those actions would undermine the fundamental commitment they make to secure the financing for the issuer upfront.