Investment Banking Investment bankers deals mainly with institutional

Investment Banking Investment bankers deals mainly with institutional clients , investment bankers are primary involved in raising capital for corporation by distribution the securities they issue to the public. Companies in need of capital hire investment banker , who arrange to sell their debt or equity securities to the public and acts as intermediary between individual investors and the issuing corporation. 1 Prepared By : Ghazi Mamandi 23 December 2021

Investment Banking ( or securities firms ) Securities firms serves as important intermediaries by helping governments and firms raise funds. They also facilitate ( or make possible ) the transactions between investors in the secondary market. Securities firms provide different services : 1 - They facilitate stock and bond offering 2 - they facilitate corporate restructuring activities 2 Prepared By : Ghazi Mamandi 23 December 2021

Services provided by securities firms 3 - some securities firms provide brokerage • services for investors who want to either buy or sell various types of securities in the secondary market. The securities firm that provide these services are commonly referred to as brokerage firms. Many securities firms provide both investment banking services and brokerage services. some of these firms are independent , but many are of them are part of a financial Holding companies structure which include insurance firms and securities trading Banks, firms. 3 Prepared By : Ghazi Mamandi 23 December 2021

Facilitating New Stock Offering A securities firm acts as an intermediary between a corporation issuing securities and investors by providing the following services: Origination ( or beginning ) § Underwriting § Distribution § Advising § 4 Prepared By : Ghazi Mamandi 23 December 2021

Origination When a corporation decide to publicly issue • stocks. It may contact a securities firm. The securities firm can recommend the appreciate amount of stock to issue because it can anticipate the amount of stock that the market can likely reduction in the stock absorb without causing a price. It evaluates the corporations financial condition to determine the appropriate ( or suitable ) price for the newly issued stock. If the corporation has issued stock to the public before 5 Prepared By : Ghazi Mamandi 23 December 2021

Cont. Origination The price should be the same as the market price on its outstanding stock. If not, the securities firm will compare the corporations financial characteristics with those to other similar firm will compare the corporations financial characteristics with those other similar firms in the same industry that have stock outstanding to help determine the proper valuation of the corporation and therefore the price at which the stock should be sold. 6 Prepared By : Ghazi Mamandi 23 December 2021

Underwriting The original securities firm may form an underwriting syndicate by asking other securities firm to underwrite a portion( or a part ) of the stock. Each participating securities firm share in the underwriting fees charged to the issuer. the stock offering are normally based on a best –efforts agreement where by the securities firm does not guarantee a price to the issuing corporation. 7 Prepared By : Ghazi Mamandi 23 December 2021

Underwriting When securities firm facilitate initial public offering (IPOs )they attempt to price the stocks high enough to satisfy the issuing firm. Securities firm must also attempt to satisfy the institutional investors that may invest in the IPO. 8 Prepared By : Ghazi Mamandi 23 December 2021

Distribution Once all agreement between the issuing firm , the • originating securities firm and other participating securities firm are complete and registration is approved by the securities and Exchange commission (SEC ) , the stock may be sold. The prospectus ( or brochure )is distributed to all potential purchasers of stocks and the issue is advertised to the public. , in some cases the issue sells within hours, if the issue does not sell as expected , the underwriting syndicate will likely have to reduce the price to complete the sale. 9 Prepared By : Ghazi Mamandi 23 December 2021

Distribution The corporation must pay flotation costs or costs of placing securities , first it must pay. fees to the underwriters who place the stock with investors. Second, it gain issue cost , including printing, legal , registration and accounting expenses. 10 Prepared By : Ghazi Mamandi 23 December 2021

Advising The securities firm acts as an adviser throughout Stage. Even after the stock is issued , the securities firm may continue to provide advise on the timing amount , and terms of future financing. Included with this advice are recommendations on the appropriate (suitable ) type of financing (bonds, stocks or long term commercial loans ). 11 Prepared By : Ghazi Mamandi 23 December 2021

Facilitation new bond offering A securities firms role in placing bonds in somewhat similar to its role in placing stock. The four main service of securities firm in placing bonds are explained in turn. 1 - Origination ( or beginning ) The securities firm may suggest a maximum amount of bonds that should be issued , based on the issuer characteristics. if the issuer already has a high level of outstanding debt , the bonds may not be well received by the market. 12 Prepared By : Ghazi Mamandi 23 December 2021

cont. Origination ( or beginning ) Because the issuers ability to meet the debt payments will be questionable. consequently ( or as a result ) , the bonds will need to offer a relatively high yield , which will increase the cost of borrowing to the issuer. Next, the coupon rate , the maturity , and other provision are decided , based on the characteristics of the issuing firm. The asking price on the bonds is determined by the devaluing market price of existing bonds that are similar in their degree of risk , term to maturity. 13 Prepared By : Ghazi Mamandi 23 December 2021

Underwriting Bonds 14 Prepared By : Ghazi Mamandi 23 December 2021