[ychantit]

The underwriter take a huge risk in the deal, underwriting means that he sometimes needs to buy the shares from the company (i.e. Twitter here) and Twitter will not need to care if the underwriter get reed off the shares on the market because he got paid first this is a huge risk .

A second point is that the underwriter is paid to keep the shares liquid on the market at least for the first 30 days depending on the contract deal. It means that the underwirter will need to put himself on the buying side or the selling side everytime someone want to buy/sell his shares ... this is a huge risk again just look at the volume of the share deals everyday on the market to see what kind of liquidity the underwriter need to keep ready to play ... I agree with you that this don't create value for the economy out there but it is necessary to keep the wheel rolling ...