1762664
Investment Banks, Security
Brokers and Dealers and
Venture Capital Firms
- The process of underwriting a stock or bond issue requires
that the investment bank purchase the entire issue at a
predetermined price and then resell it in the market
- Most investment banks are attached to large brokerage houses.
- Investment banks may lose future business if new
securities are oversubscribed
- Often investment bankers will form a group, each one
buying only a portion of the new securities to be issued.
Such a group is called an underwriting syndicate
- In a best efforts agreement, the investment banker makes no
guarantee regarding the price the issuing firm will receive, but
agrees to sell the securities on a commission basis
- Private placements are more common for
the sale of bonds than for stocks.
- By making a market in thinly traded stocks, securities
dealers solve the nonsynchronous trading problem. which
is of particular benefit to small businesses
- An instruction to a securities agent to sell a stock
when it reaches a specific price is a stop loss order
- An instruction to a securities agent to purchase a stock as long
as its price does not exceed a specified level is a limit order
- Funding just one or a small number of firms is not
a characteristic feature of venture capital firms
- The sources of venture capital funding have shifted from
wealthy individuals to pension funds and corporations
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