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Investment banking corporate finance activities involve raising cash for a corporation, in order to grow or expand business opportunities. Corporate finance is provided by investment banks that are registered with the U.S. Securities and Exchange Commission, or SEC. It is the role of the investment bank to assist a corporation and identify ways to raise capital. Typically capital is raised with securities, or stock and bonds.
Role of the Investment Bank
An investment bank consults with a corporation to determine their needs for capital. During this meeting, the investment bank discusses funding options for the corporation. These funding options include offering shares of the corporation’s stock to the public in what is called an initial public offering, or IPO. The corporation may also decide, with the help of the investment bank, to issue debt in the form of bonds. The stock issued in an IPO represents a share of ownership for the stock purchaser while the bonds are a debt obligation of the corporation to the bondholder.
Bringing the Corporation to Market
Once the type of capital activity is decided, the investment bank acts as an underwriter, filing the necessary paperwork with the SEC and state(s) where the stock or bonds will be sold. The investment bank receives a fee for their work, as well as any commission resulting from the sale of the corporation’s stocks or bonds.
