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Details Of Some Functions of An Investment Bank

Details Of Some Functions of An Investment Bank

Issue of IPO:

Investment banks underwrite stock offerings just as they do bond offerings. In the stock offering process, companies sell a portion of the equity (or ownership) of itself to the investing public. The very first time a company chooses to sell equity, this offering of equity is transacted through a process called an initial public offering of stock (commonly known as an IPO). Through the IPO process, stock in a company is created and sold to the public. After the deal, stock sold in the India is traded on a stock exchange such as the NSE or BSE.

From an investment banking perspective, the IPO process consists of these three major phases: hiring the mangers, due diligence, and marketing.

Details Of Some Functions of An Investment Bank

 Hiring the Managers: The first step for a company wishing to go public is to managers for its offering. The choice depends on the past transaction experience, the fee quotes, the valuations the bank promises to fetch for the company’s offrering etc

Due Diligence and Drafting: Once managers are selected, the second phase of the process begins. For investment bankers on the deal, this phase involves understanding the company’s business as well as possible scenarios (called due diligence), and then filing the legal documents as required by the SEs. Lawyers, accountants, I-bankers, and of course company management must all toil for countless hours to complete the filing in a timely manner. The Securities Act also makes it illegal to offer or sell securities to the public unless they have first been registered. It is important to note, however, that the SEC has no authority to prevent a public offering based on the quality of the securities involved. It only has the power to require that the issuer disclose all material facts.

Marketing: The third phase of an IPO is the marketing phase. Once the approval comes on the prospectus, the company embarks on a roadshow to sell the deal. A roadshow involves meeting potential institutional investors interested in buying shares in the offering. Typical road shows last from two to three weeks, and involve meeting numerous investors, who listen to the company’s presentation, and then ask scrutinizing questions.

Details Of Some Functions of An Investment Bank


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 Details Of Some Functions of An Investment Bank

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