1. Securities Markets

2. Two Types Primary Market: where first-hand securities are traded or a market of new issuance of securities. Secondary Market: Where second-hand securities are traded Or

3. Forms of Primary Market There are two forms of primary market: – Initial Public Offerings (IPOs): refers to common shares of a company being sold for the first time. – Seasoned Issue: New issues are offered by the firm which already floated the shares in the market. Both the IPO and Seasoned New Issue use investment banks or syndicate (primary market).

4. Investment Bank Investment banks are firms specializing in the sale of new securities to the public usually by underwriting the issue. Investment Banking Syndicate: a group of investment bankers in order to diversify the risk. The managing bank acts as the managing underwriter.

5. The companies may choose to sell the securities through (1) public offering (2) private placement Private placements is the selling of new securities (typically debt securities) to the targeted investors (such as financial institutions). Public offering refers to selling of securities to general public

6. Advantages Of Private placement Registration of the securities with SECP is not required Funds can be quickly raised with private placements, IPOs takes up to 4 months However, PP cannot be traded on stock exchange and thus have less liquidity Because of illiquidity, higher rate of return is paid to investors.

7. Securities are sold to general public with the help of investment banker Investment banker helps companies in IPOs with their advice, underwriting and distribution of securities through ‘firm commitment’ or ‘best effort’. Firm Commitment: Investment banker underwrites the new securities by purchasing the securities from the issuing company and assumes the risk of selling to general public. Such agreement is called firm commitment. Best Effort: An alternative to firm commitment is best effort agreement where the IB does not purchase the securities, rather tries his best to sell securities at good price Investment Bank and Public Offering

8. Role of Investment Bank in Formation of a Public Limited Company Promoters Memorandum of Association – External affairs Article of Association – Internal Affairs Certificate of Incorporation Prospectus (Initial Public Offerings) Role of Investment Bank Certificate of Commencement