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IPOs often become unsubscribed because the price is too high. Sometimes, a back stop purchaser agrees to buy leftover shares from the underwriter of an equity or rights offering. A back stop purchaser is like insurance -- the purchaser guarantees in some form that a company (and its investment bank) will raise the money it intends to raise.

In our example, if for some reason Bank ABC can’t sell all the shares in the IPO (this is called the unsubscribed portion), the back stop purchaser agrees to buy those leftovers. The back stop purchaser, of course, obtains a fee for agreeing to be the back stop because it is taking on the risk of having to purchase (and they try to reissue) the Company XYZ securities.