Equity Capital Markets

What is Equity Capital Markets?

Equity Capital Markets (ECM) refer to the financial market segment where companies raise funds by issuing equity securities, such as shares, and where these securities are traded. ECMs enable businesses to secure capital for growth, expansion, or operations while providing investors with ownership opportunities and potential returns.

Key Features

Primary Market Activities:

• Initial Public Offerings (IPOs): A private company offers shares to the public for the first time, transitioning to a publicly traded entity.

• Follow-on Offerings: Public companies issue additional shares to raise more capital post-IPO.

• Private Placements: Companies sell unlisted shares directly to select investors, such as institutions or high-net-worth individuals.

Secondary Market Activities:

• Stock Exchanges: Platforms like the NYSE or NSE where investors trade existing shares.

• Over-the-Counter (OTC) Markets: Shares are traded directly between parties, often for smaller or unlisted companies.

• Block Trades and Accelerated Book Builds: Large share volumes are sold quickly, typically to institutional investors.

Importance and Functions

• Capital Raising: Enables companies to fund growth, research, or operations without debt.

• Valuation and Market Sentiment: Establishes company market value and reflects economic confidence.

• Resource Allocation: Directs capital efficiently within the economy.