How do members of the syndicate purchase bonds during an offering?

Members of the syndicate purchase bonds during an offering at the offering price minus the takedown. In a syndicate, which is a group formed by several underwriters to manage the issuance of bonds or stocks, the takedown refers to the amount deducted from the offering price that compensates the underwriters for their services.

When the syndicate members buy the bonds for resale to the public, they do so at a price that reflects the offering price minus this takedown. This arrangement allows syndicate members to earn a profit on the bonds they later sell to retail investors at the offering price. The takedown structure helps facilitate the distribution of the securities and incentivizes members in the syndicate to actively market and sell the bonds.

Understanding this process is crucial for grasping how underwriting and syndication work during bond offerings, emphasizing the importance of the takedown in the overall pricing strategy in the public securities market. This concept is foundational in the context of the underwriter's profit structure as well as the overall dynamics of the bond issuance process.