Being the lead underwriter for a stock offering, especially an initial public offering (IPO), can bring a large payday if the market shows high demand for the shares. Often the stock issuer will allow the lead underwriter to create an over-allotment of shares if demand is high, which can bring in even more money to the underwriting firm. There are substantial risks involved in underwriting stock offerings - any one company could plummet in the open market once public trading begins. This is why the large investment banks, such as Merrill Lynch, Morgan Stanley, Goldman Sachs, Lehman Brothers and others will look to conduct many diverse offerings in the course of a year.
One or two great stock offerings a year can be enough to meet company earnings targets, but market conditions as a whole will determine the relative amount of profit the investment banks can earn. In the zooming market phase of the late-1990s, investment banks were making money hand over fist as eager investors gobbled up any new shares that came to market, and traded them much higher once on the exchange. However, when the market collapsed in late-2000, the underwriting community went into hibernation mode, advising even the best private companies to "wait out the storm" before going public.