Equity Capital Markets
Ways to raise money and the stages:
- Less than 500 investors in accord with SEC rules.
- Registering on an exchange.
- Publicly tradable.
- The right of the underwriter(s) to sell additional stock.
- Stabilizes the price.
- Post-IPO when the company still has equity to sell.
- Non-publicly traded.
- Diluting stock.
- Current stock-holder have the right to buy more.
- They can sell this right.
- All orders controlled by the syndicate
- Orders controlled by any one bank within the syndicate.
- Very secretive.
- Relies heavily on network of clients.
- Operates outside of market hours so as not to spook the market.
- Deals with large amounts (~1% of company).
- Offers a sizable discount on market price.
- Essentially selling "warrants". That is to say, an agreement to exchange the equity through the exchange when the market next opens.
- Doesn't want the salespeople to know anything!
Debt Capital Markets
There are two types of salesperson:
- Institutional investors share of deal.
- ~98% of demand.
- Retail investors.
- More legal restriction involving selling to these investors (eg, conflicts of interest).
- Investment bank buys the bond at booking time and sells slices of it.
- This is iff the investment bank is handling the booking and delivering.
- Alternative form of payment
- Unrelated bond from a different issuer.
- What a bank would like a syndicate member to get.
- This is applicable when said bank is not the book runner.
- Very desirable role for an investment bank.
- Can see the hedges and swaps of other counter-parties. This is valuable market data.
- Role is assigned by the issuer.