Investment banking in a broad sense: investment banking in a broad sense includes many capital market activities, including corporate financing, merger and acquisition consulting, stock sales and trading, asset management, investment research and venture capital business.
Extended data:
Trading means
1, brokerage transaction
Investment banks play a triple role as market makers, brokers and traders in the secondary market. As a market maker, after underwriting securities, investment banks have the obligation to create a secondary market with strong liquidity for the securities and maintain the stability of market prices.
As brokers, investment banks trade on behalf of buyers or sellers and on behalf of prices provided by customers. As dealers, investment banks need to buy and sell securities themselves.
This is because investment banks are entrusted by customers to manage a large number of assets and need to ensure the preservation and appreciation of these assets. In addition, investment banks also carry out risk-free arbitrage and risk arbitrage in the secondary market.
2. Direct sales when issuing bonds
There are two ways to issue securities: public offering and private offering. The former underwriting is actually a public offering. Private placement, also known as private placement, means that issuers do not sell securities to the public, but only to a limited number of institutional investors.
Such as insurance companies and mutual funds. Private placement is not restricted by public offering laws and regulations, which can not only save the time and cost of issuance, but also bring higher yield to investment banks and investors than trading securities with the same structure in the open market.
Therefore, in recent years, the scale of private placement is still expanding. But at the same time, private placement also has some shortcomings, such as poor liquidity, narrow distribution area, and difficulty in public listing to expand corporate visibility.
3. Mergers and acquisitions
Merger and acquisition has become the most important business component of modern investment banks except securities underwriting and brokerage business. Investment banks can participate in M&A activities of enterprises in various ways.
4. Project financing
Project financing is a technical means of package financing for a specific economic unit or project planning arrangement. The borrower can only rely on the cash flow and income of the economic unit as the source of repayment and the assets of the economic unit as the loan guarantee.
Investment bank plays a very key role in project financing, which will be closely linked with government agencies, financial institutions, investors and project sponsors related to the project.
Coordinate lawyers, accountants, engineers, etc. Jointly carry out the feasibility study of the project, and then organize the financing needed for project investment by issuing bonds, funds, stocks or loans, auctions, mortgages, etc.
The main tasks of investment banks in project financing are: project evaluation, financing scheme design, drafting of relevant legal documents, relevant credit rating, securities price determination and underwriting.
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