• The underwriter also uses up its capital, which would probably otherwise be put to better use (given sell-side investment banks are not usually in the business of buying new
  issues of securities).

• [1] The advantage of the bought deal from the issuer’s perspective is that they do not have to worry about financing risk (the risk that the financing can only be done at
  a discount too steep to market price.)

• The disadvantage of the bought deal from the underwriter’s perspective is that if it cannot sell the securities, it must hold them.

 

Works Cited

[‘”In a Bull Market, Bought Deals Soar”. Raymond James Financial. Retrieved November 23, 2018.
2. ^ Barry Critchley (February 18, 2015). “Bought deals are the norm in Canada, but they aren’t risk-free”. Financial Post.
Photo credit: https://www.flickr.com/photos/29233640@N07/5605093210/’]