An equity issuance or equity issue is the sale of new equity or
capital stock by a firm to
investors. Equity issuance can involve a private sale, in which the
transaction between investors and the firm takes place directly, or publicly, in which case the firm has to register the securities with the authorities and the sale takes place in an organized market, open to any registered investor, a process more akin to an
auction. Two common types of public equity issuance are
initial public offering
An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investm ...
s (IPOs) and
secondary equity offerings (SEOs or FO). This is one of the ways firms
finance
Finance refers to monetary resources and to the study and Academic discipline, discipline of money, currency, assets and Liability (financial accounting), liabilities. As a subject of study, is a field of Business administration, Business Admin ...
themselves, that is, they obtain funds from
investors in order to engage in
business
Business is the practice of making one's living or making money by producing or Trade, buying and selling Product (business), products (such as goods and Service (economics), services). It is also "any activity or enterprise entered into for ...
.
Role of investment banks
Investment banks such as
Goldman Sachs or
Morgan Stanley are frequently
intermediaries in the equity issue process, and for some of these firms the
fees associated with
IPOs are a substantial part of their income. The role of these
bank
A bank is a financial institution that accepts Deposit account, deposits from the public and creates a demand deposit while simultaneously making loans. Lending activities can be directly performed by the bank or indirectly through capital m ...
s is to study the characteristics and business plans of the firm which is issuing equity and then recommend a minimum purchase price to investors. On the other hand, they are in charge of convincing investors that the purchase is a good
opportunity and therefore the success of IPO placement partly hinges on the
reputation of the investment bank that is doing it.
Often it is done by
joint stock companies to raise money.
See also
*
Thomson Financial league tables
*
Underwriting
References
{{DEFAULTSORT:Equity Issuance
Initial public offering