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Capital Markets and Investment Banking Process

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Capital Markets and Investment Banking Process Paper

Nick Thakurani


September 23, 2012

Al Marable

Today's business world is growing at a rapid pace. The industries in the business world are getting more competitive and to maintain a competitive advantage a business must perform the best possible investments and decisions. Investment banks perform a number of important services to the business world and economy.

Investment banks process form an Initial Public Offering is very crucial. It is a detailed service that the investment banks performs for a company looking to go public. The first step for a private company is to select an appropriate investment bank. The bank is usually selected based on its industry experience. The investment bank will act as an advisor and most importantly performs the underwriting function. The second step is to prepare a letter of intent. This letter will list out all the terms and conditions of how the issuing company and the investment bank will perform the IPO. This letter will also include all the fees associated with the process as well as a firm commitment from the investment bank. The next step is the SEC Filing. The investment bank will help the company in preparing and filing a Form S-1 with the US Securities and Exchange Commission. Once approved by the SEC, the next step in the process is the marketing of the IPO.

The investment bank will then market the IPO to public investors and institutional investors. However, shares are not sold at this point. The next step is finalize a date of the IPO with the SEC. After finalizing the date the Investment bank and issuing company will have a final agreement. This agreement will finalize the issuing price and the amount of shares to be issued. The final process of the investment bank is to ensure that the IPO has stability. The investment bank will usually trade shares of the company for several months until stability is maintained in the market.

An investment portfolio should consist of an effective asset class based on the requirements of the investor. There are several important factors that should be considered before performing any investment. "The three main asset classes are equities (stocks), fixed-income (bonds) and cash equivalents (money market instruments)." It is important for an investor to select the correct asset class for his investment portfolio. One of the most important factors it the source and amount of returns possible with each asset class. Also an investor must understand the risk associated with each type of investment. Larger returns usually involve higher risks. Another factor to consider is the investment scale required. It is important for the investor to understand the size of the investment and the asset class best suited. Lastly, an investor must consider how liquid each asset class is. All these factors along with the investor's goals will determine which asset class he or she uses for their investment portfolio.

"Capital market instruments are responsible for generating funds for companies, corporations and sometimes national governments. Investors use these



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