Capital markets – raising equity and debt capital

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The Complete Investment Banking Course 2021

The #1 Course to Land a Job in Investment Banking. IPOs, Bonds, M&A, Trading, LBOs, Valuation: Everything is included!

08:44:54 of on-demand video • Updated January 2021

  • Start a career in Investment Banking or Private Equity
  • Pass investment banking interviews
  • Build financial models from scratch (shown step-by-step)
  • Build valuation models – DCF, LBO and multiples
  • Have solid financial and business acumen
  • Take your career to the next level!
  • Tell the story of how investment banking services first appeared
  • Understand the difference between investment and commercial banking
  • Explain the mechanics of an Initial Public Offering
  • Understand how pricing is determined in an IPO
  • Draw an IPO timetable
  • Understand why companies go public
  • Explain the mechanics of a bond offering
  • Understand how pricing is determined in a bond offering
  • Draw a bond offering timetable
  • Understand why companies raise public debt
  • Explain loan syndication and who participates in the syndicate
  • Understand securitization and explain why banks use securitization
  • Learn why companies buy other companies
  • Identify successful M&A transactions
  • Explain the deal lifecycle
  • Tell the difference between Financial and Corporate buyers
  • Describe the different payment options in an M&A deal
  • Understand the essence of restructuring services
  • Learn about the different ways to restructure a company
  • Become familiar with trading and brokerage and the securities traded on Financial Markets
  • Understand asset management services
  • Be able to describe asset management vehicles and expected rates of return
  • Calculate a company’s cost of debt, cost of equity, and WACC
  • Perform LBO valuation
  • Understand the rationale behind Leveraged Buyout deals
  • Be able to tell who carries out LBO deals and why they can be very profitable
  • After this course, you will have the skills to start a successful career in Investment Banking and Corporate Finance
English [Auto] As anticipated earlier in this section of the course, we will talk about the four main areas of investment banking activities, the four lessons you will see here will provide a detailed description of underwriting services, often called capital markets advisory services, including M&A and restructuring, trading and brokerage and asset management. Then from the next chapter onwards, will dedicate significant time to provide you with an inside look of each of these investment banking divisions. Capital markets are one of the most fascinating areas of investment banking. Companies need these services when they are about to go public or want to issue debt sold to the public. When a company wants to raise equity, we talk about ECM standing for equity capital markets and when it wants to raise debt, we talk about DCM standing for debt. Capital markets going public is a critical moment in the life of any company. This means it has grown from a small business to a large entity ready to get public investors on board. The company's shares will be sold to public investors and they can determine who will run the business and who will sit on the board of directors. This is a very complex process that must be carried out at the right time. The founders of the company want to sell at the right price and monetize their hard work. At the same time, public investors are interested in making an investment in a company with great management and a great growth potential. The company going public must increase its administrative and finance staff significantly. It will have to prepare several documents and financial reports not required for private firms. This is a cost it will have to bear. Timing plays a critical role in an initial public offering. The IPO must be carried out at the right moment. The company must be ready in terms of size, profitability, administrative capacity, growth potential and investors must be convinced that their money is in good hands. What is the investment bankers role in this process? Historically, investment bankers have been the trusted advisers of companies who ensure that the whole process goes smoothly. It is their job to provide guidance as to when is the right time to go public, how the company can position itself to attract investors interest to organize meetings between the company's management and investors, and to present to investors the investment opportunity. In addition, investment bankers build lists of investors intentions and determine what will be the price at which the company will sell its shares. Ultimately, after the IPO has taken place, investment bankers will exercise certain instruments at their disposal to stabilize the price of the stock in the first few days of its trading on the market. OK, perfect. This is an IPO, but what if a company already listed wants to issue some additional shares? Is that possible? Yes, sure it is. It is a much easier process called CEO seasoned equity offerings. It is a much easier process because everything is already in place. The company is already listed on the stock exchange. Its shares have a price. It has already created all documents necessary to be in compliance with financial regulations. So the role of investment bankers is limited to finding investors who will buy additional shares and participate in the companies increase of capital. There will be several meetings. Investment banks will create a list with potential buyers of the securities and will underwrite the stock once sufficient demand has been established. Debt capital markets are the second main pillar of underwriting services. Besides equity, a company could be interested in issuing debt securities called bonds. A bond offering is not different from an equity offering. The players involved are almost the same. The main difference is that bonds can be issued by sovereign countries. Most people think of debt in its traditional form, borrowing money from a commercial bank. But that's not necessarily the case. A company or a government can borrow from public investors to public debt. Markets work efficiently, especially when the amount to be borrowed is substantial. Several investors buy these securities and expect to be paid and interest rate throughout the duration of the bond. Similar to the issuance of equity, investment bankers advised the loan, prepare company presentations, find potential investors and price the loan. On average, bonds are much easier to price compared to equity, mainly because every company that issues a bond has a credit rating and opinion about its credit worthiness expressed by independent credit agencies. Another form of DCM services that has been very popular in recent years are the loan syndications. These are loans granted by a pool of banks. Usually several banks get portions of a loan. Such group of banks is called the syndicate. Syndicated loans are a hybrid between bonds and commercial banking loans. There are several reasons banks can be interested in loan syndications, diversification, fee generation and importantly, lending opportunities in geographic areas in which they have no presence and expertise. So these are the main types of equity and debt offerings in which a bank's capital markets division is involved. In our next lesson, we will talk about the advisory services provided by investment banks. Have you heard of Zinga, this is the company that created Farmville, Facebook's most popular game, the company grew so rapidly that it filed for an IPO in 2011, 90 percent of its revenue came from Facebook. Zynga became listed one year earlier than Facebook and raised one billion dollars. The offering was the biggest buy a U.S. Internet company since Google. All right, so we've talked about capital markets and initial public offerings, here's a task for those of you who want some extra work, find out which was the largest non tech IPO in the history, how much money was raised in the IPO, what happened to the company's shares on the first day of trading? Compare current stock prices and the price at which shares were listed on the first day of trading.