When a firm uses a broker for its stock issue and aims to sell shares for a commission, this distribution method is known as?

When a firm uses a broker for its stock issue and intends to sell shares for a commission, this distribution method is referred to as "Best Efforts." In a Best Efforts arrangement, the broker commits to selling as many shares as possible, but does not guarantee that the entire issue will be sold. Instead, the firm pays the broker a commission based on the number of shares sold, and the broker acts as an intermediary, attempting to place the shares with investors.

This method is advantageous for the issuing firm because it bears less risk compared to other methods like Firm Commitment, where the underwriter guarantees the sale of the entire issue and provides a certain amount of capital upfront. In contrast, the Best Efforts approach allows the firm to retain some flexibility regarding the amount of capital it raises, depending on market conditions and investor interest.

In summary, the Best Efforts distribution method involves a broker selling shares on behalf of the firm for a commission without guaranteeing the full sale of the issue, making it a lower-risk option for the issuer.