How Does Securities Underwriting Work?

Securities Underwriting — What Is It in Simple Terms?

Underwriting is a service that helps a company issue and sell its stocks or bonds to investors. It is commissioned by a company that needs to raise financing through the capital markets and carried out by a professional market participant, such as a broker, investment bank, or a combination of such institutions (a syndicate).

The term originated in the insurance and banking industries, where underwriting refers to assessing and assuming risks—for example, when a bank evaluates a borrower’s creditworthiness before granting a loan. In the securities market, the term has a broader meaning: an underwriter not only assesses risks but also handles the organizational process, from analyzing the company to selling the securities to initial investors.

For businesses in Kazakhstan, underwriting is a practical tool often used when preparing and placing securities on the Kazakhstan Stock Exchange (KASE) or on the Astana International Exchange (AIX), within the framework of the Astana International Financial Centre (AIFC).

Who Is an Underwriter?

An underwriter in the securities market is typically a broker, dealer, or investment bank licensed to arrange securities transactions. For large offerings, several companies may form an underwriting syndicate to share risks and reach a broader range of investors.

What Does an Underwriter Do?

• analyzes the issuer, its financial position, and its capital-raising objectives;
• assesses the company’s risks and potential investor demand;
• helps determine the transaction structure, offering size, and preliminary price range;
• prepares offering documentation together with legal and audit advisers;
• organizes a roadshow – presentations of the company to institutional and retail investors;
• collects preliminary purchase orders (builds the order book) and allocates the offering among investors;
• after the offering, may act as a market maker by supporting the security’s quotations and liquidity on the exchange.

How Is an Underwriter Different from a Broker?

The role of an underwriter is often simplified to that of a “middleman between a company and investors,” but this is not quite accurate. A broker executes an investor’s orders to buy and sell securities, while an underwriter organizes the issuance and placement of securities on behalf of the issuer—from preparing the issuer for the offering to selling the securities to the initial group of investors. It is an expert and organizational function, rather than a one-off intermediary service.

When a Company May Need Underwriting

Underwriting is particularly relevant when a company raises capital from public or limited groups of investors in the securities market rather than through a bank loan:

• bond issuance — raising debt financing from investors instead of a bank;
• IPO — an initial public offering of shares, when a company goes public for the first time;
• share placement (SPO) — an additional offering of shares by an already public company;
• raising capital in the securities market more broadly — as an alternative to bank financing, especially when banks’ lending limits and terms do not fully meet the company’s funding needs.

This matter is particularly relevant in Kazakhstan. In 2026, the Agency for Regulation and Development of the Financial Market (ARDFM) proposed measures to simplify companies’ access to the stock market. In particular, the new procedure is expected to shorten the IPO preparation process by approximately three to five months. As part of the draft Capital Market Development Program for 2026–2030, tax incentives for companies entering the domestic equity market are also being considered, including the possibility of deducting expenses related to preparing for and conducting an IPO.

How Securities Underwriting Works

The process consists of several successive stages—from the initial analysis of the company to the start of trading in the security on the exchange. The specific procedures and timelines for each transaction should be checked against the current exchange regulations (KASE, AIX) and regulatory requirements applicable on the offering date.

1. Analysis of the Issuer and Capital-Raising Objectives

The underwriter analyzes the company’s business, financial performance, ownership structure, and the purpose for which the capital is being raised - such as expanding production, repaying debt, or financing a project.

2. Preparing the Offering Structure

The type of security, offering size, and proposed exchange venue are determined. Joint-stock companies may issue shares, while bonds may be issued by both joint-stock companies (JSCs) and limited liability partnerships (LLPs).

3. Preparing the Documentation

The offering prospectus and other offering documents are prepared. For offering on KASE, the legislation of the Republic of Kazakhstan and the requirements of the Agency for Regulation and Development of the Financial Market (ARDFM) apply. The Central Securities Depository (CSD) of the Republic of Kazakhstan assigns an ISIN code and maintains records of ownership rights, while the listing is carried out by KASE.

For an offering on AIX, AIFC law, AFSA requirements, and AIX rules apply. The exchange’s infrastructure includes its own central securities depository, AIX CSD.

4. Determining the Offering Parameters and Price Range 

Based on demand analysis and market conditions, the underwriter proposes a preliminary price range and offering size to the issuer.

5. Working with Potential Investors

A roadshow is conducted – a series of meetings and presentations for institutional investors, along with an information campaign targeting retail investors.

6. Order Collection and Placement

The underwriter collects investor orders through book-building. Based on the results of the book-building process, the issuer, together with the arrangers, determines the final offering parameters. The underwriter allocates the securities among applicants and organizes the start of trading on the exchange.

The Role of an Underwriter in a Bond Issuance

For an issuer, bonds are a way to raise debt financing directly from investors without taking out a bank loan: the company makes regular coupon payments and repays the face value at maturity. For more information about bonds, see the article “Deposits or Bonds: What Should Investors in Kazakhstan Choose?”

The underwriter supports the entire process – from preparing the issuer to placing the securities with investors. More information is available in the “Underwriting Services” section on fbroker.kz, which also lists completed transactions.

Below are several illustrative examples of bond offerings in the Kazakhstani market in which Freedom acted as an underwriter or lead underwriter:

For example, OnlineKazFinance (Solva), Kazakhstan’s largest online microfinance organization, actively raises financing through the bond market. According to the company, since its first bond issue in 2020, it has completed more than 70 placements on KASE and AIX. Solva uses the funds raised, among other things, to finance lending to micro and small businesses in Kazakhstan.

The Role of an Underwriter in Share Placements and IPOs

Preparing the Company for the Market

The company needs to bring its corporate governance, financial reporting, and internal procedures into compliance with the requirements of auditors, the exchange, and the regulator. For example, KASE requires financial statements to be audited by audit organizations recognized by the exchange and imposes specific requirements regarding the company’s operating history for share listing. This preparation can take anywhere from several months to several years.

Working with Investors

The underwriter organizes a roadshow and information campaign, introduces the company to institutional and retail investors, and explains the business’s investment story.

Building Demand for the Offering

Based on the order book, the underwriter determines the final offering price and allocates the shares among investors.
Two of the largest IPOs in recent years on the Kazakhstani market were conducted with Freedom acting as an underwriter:

•    IPO of Air Astana JSC (2024) — Freedom Broker acted as the lead manager of the offering on AIX, KASE, and LSE. The total volume of orders collected on the Kazakhstan exchanges amounted to USD 483 million, with Freedom Broker accounting for 27%; orders totaling USD 215 million were allocated.

•    IPO of KazMunaiGas NC (2022) — Freedom Broker acted as co-coordinator and bookrunner on AIX and KASE. The offering price was KZT 8,406 per share, and the total volume of orders collected amounted to KZT 181 billion, with Freedom Broker accounting for 50%; orders totaling KZT 153 billion were allocated.

At the end of 2023, Freedom was among the companies recognized by KASE in the “Underwriter of the Year” category for the equity and corporate bond markets. If you are not yet familiar with how share offerings work, a good place to start is the article “What Is an IPO and Why Does a Company Need One?”, which explains the basic concepts and the key stages of preparing for a stock market listing.

What Underwriting Does for an Issuer

• preparing the offering — from analyzing the company to preparing a complete set of offering documents;
• structuring the transaction — selecting the type of security, offering size, and placement parameters;
• working with market infrastructure — the exchange, central securities depository, and regulator;
• finding investors — both institutional and retail, in Kazakhstan and abroad;
• organizing the offering itself and, where necessary, providing ongoing support for the security’s liquidity on the exchange.

It is important to understand that underwriting does not guarantee a successful offering or the raising of a specific amount of capital – the final outcome depends on market conditions and actual investor demand.

Risks and Limitations to Consider

• no guaranteed demand — investors may not purchase the entire amount of securities offered;
• market conditions — prices and interest rates in the capital markets change, affecting the final terms of the offering;
• cost of raising capital — underwriter fees, as well as audit, legal, and advisory expenses;
• disclosure requirements — after the offering, the company is required to publish regular reports and disclose material events;
• preparation timeline — the process from analyzing the company to listing on an exchange may take several months or even years.

Как выбрать андеррайтера

When choosing an underwriter, it is worth considering several practical criteria:

• track record in securities offerings — the number and volume of previously completed transactions;
• expertise in the relevant market — experience working specifically with shares or bonds on KASE, AIX, or international exchanges;
• understanding of the issuer’s industry — knowledge of the company’s business specifics;
• access to investors — a network of institutional and retail investors in Kazakhstan and abroad;
• team — the qualifications and experience of the specialists who will manage the transaction;
• transparency of the terms of cooperation — a clear fee structure and clearly defined obligations of the parties.

The Freedom team has completed dozens of offerings on KASE and AIX, ranging from the IPOs of Air Astana and KazMunaiGas to bond offerings by KazAgroFinance, the Eurasian Development Bank, and Kazakhstan Sustainability Fund. Companies seeking assistance with a share or bond offering can contact Freedom directly through the "Securities Underwriting” page on fbroker.kz, where they can also submit a request for a consultation.

Frequently Asked Questions About Underwriting

What is underwriting in simple terms?

It is a range of services for preparing and organizing a company’s securities offering—from analyzing the business to selling the securities to investors.

Who can act as an underwriter?

A broker, dealer, or investment bank licensed to arrange securities transactions; for large offerings, a syndicate of several such companies may act as the underwriter.

Why does a company need an underwriter when issuing bonds?

The underwriter handles document preparation, determines the offering parameters, finds investors, and organizes the placement. This enables the company to raise debt financing without taking out a bank loan.

How does underwriting differ from brokerage services?

A broker executes individual client orders in the secondary market, while an underwriter organizes the entire transaction involving the issuance of new securities in the primary market—from preparing the issuer to placing the securities with investors.

Is an underwriter needed for an IPO?

Yes. For large public offerings, involving an underwriter is standard market practice: the underwriter supports transaction preparation, pricing, and engagement with investors. Without an underwriter, the organizational process may be more complex for the issuer and require greater internal resources.

Sources and Further Reading

• Companies’ access to the stock market to be simplified — ARDFM
• Capital Market Development Program: What Will Change for Companies and Investors – ARDFM 
• How to Become a Listed Company and Raise Financing – KASE
• What Is Securities Underwriting: Functions and Types – fbroker.kz
• What Is an IPO and Why Does a Company Need One? – fbroker.kz