Investment banking is an ever-changing industry. In the financial field, the term investment bank has a very broad meaning. Broadly speaking, it includes a wide range of financial services; In a narrow sense, its business scope is more traditional.
The main business of investment banks
First, underwriting. This means that the lead underwriter and its underwriting syndicate members agree to buy all the issued securities at the agreed price and then sell them to their customers. At this time, the issuer does not bear the risk, and the risk is passed on to the investment bank.
Second, competitive bidding. Usually when investment banks are in strong passive competition. Securities issued in this way are usually high-credit bonds and are welcomed by investors.
Third, consignment. This is usually because investment banks believe that securities have low credit rating and high underwriting risk. At this time, the investment bank only accepts the entrustment of the issuer to sell securities on its behalf. If all the securities issued within the prescribed time limit plan are not sold, the remaining part shall be returned to the securities issuer, and the issuer shall bear the risk of issuance.
Fourth, sponsorship and promotion. When an issuing company increases its capital and shares, the main target is the existing shareholders, but there is no guarantee that all existing shareholders will subscribe for its securities. In order to prevent it from being difficult to raise the required funds in time, and even lead to the company's share price falling, the issuing company will generally entrust the investment bank to issue new shares to the existing shareholders, thus transferring the risk to the investment bank.