LEARN ABOUT THE WORLD OF INVESTMENT BANKING
Equity Capital Markets
Equity Capital Markets (ECM) helps companies raise capital through facilitating the issuance and trading of company shares in public markets, including activities like IPOs, follow-on offerings, and block trades.
Functions
This specialised division of the Investment Banking Division (IBD) assists companies in raising capital by issuing and trading equity securities. Equity securities represent ownership in a company, typically in the form of common stock or shares. The primary functions are listed below:
Initial Public Offerings (IPOs)
They help private companies go public by conducting IPOs. The structure of preparing an IPO involves determining the offering price, writing the prospectus and coordinating with underwriters to bring shares to the market.
Follow-on Offerings
Public companies that have gone through an IPO may need to raise additional capital for expansion, debt reduction, acquisitions, or other corporate purposes. ECM teams help with these follow-on offerings, where a company issues additional shares to raise the required funds.
Secondary Offerings
In secondary offerings, existing shareholders, such as company founders, insiders, or early investors, sell some of their shares to the public. ECM teams facilitate these transactions, ensuring compliance with regulations and assisting with the execution of the sale.
Block Trades
This involves the sale of vast numbers of shares to institutional investors in a single transaction. People working in the ECM department find buyers for the sellers and work out a deal that can be executed efficiently.
Private Placements
They also can help with facilitating private placements of equity, where companies raise capital by selling shares to a select group of institutional investors instead of the general public.
Equity-Linked Securities
They may also assist in the issuance of equity-linked securities, such as convertible bonds or warrants, which have characteristics of both debt and equity.
Bookbuilding and Pricing
For IPOs and other equity offerings, the teams have to go through bookbuilding which involves determining the offering price and allocating shares to investors. They work with the underwriters to gauge investor interest and demand for the offering.
Primary Equity Market
Secondary Equity Market
The primary market is where new securities are created. Companies and other entities can sell new shares and bonds in order to facilitate their growth or development
The secondary market is where already existing securities are traded. No new securities or capital is created and it is referred to as the traditional stock market which is comprised of stock exchanges and over-the-counter markets.