{"id":251465,"date":"2023-08-02T14:01:26","date_gmt":"2023-08-02T14:01:26","guid":{"rendered":"https:\/\/imarticus.org\/?p=251465"},"modified":"2023-08-02T14:01:26","modified_gmt":"2023-08-02T14:01:26","slug":"equity-capital-markets-and-initial-equity-offerings-ieos","status":"publish","type":"post","link":"https:\/\/imarticus.org\/blog\/equity-capital-markets-and-initial-equity-offerings-ieos\/","title":{"rendered":"Equity Capital Markets and Initial Equity Offerings (IEOs)"},"content":{"rendered":"

Within the broader capital market, the equity capital market is a platform where financial institutions, companies, and <\/span>investment banking<\/span> engage in trading financial instruments and seek to raise capital for businesses.\u00a0<\/span><\/p>\n

Unlike debt markets, equity capital markets carry an elevated level of risk, which, in turn, offers the potential for increased returns.\u00a0<\/span><\/p>\n

Instruments Traded in the Equity Capital Market<\/strong><\/h2>\n

Equity capital is obtained by selling a portion of ownership rights to a company’s assets in exchange for funds.<\/span><\/p>\n

The value of equity capital is determined by the company’s existing assets and business performance. Instruments traded in the equity capital market include:\u00a0<\/span><\/p>\n

Common shares<\/strong><\/h3>\n

Common shares represent ownership capital, entitling shareholders to dividends from profits. Common shareholders have residual claims to income and assets after preferred shareholders and bondholders.<\/span><\/p>\n

Private equity<\/strong><\/h3>\n

Due to limited access to bank capital or public equity markets, startups and smaller companies commonly use equity investments through private placements. Investors are commonly institutional investors or wealthy individuals.<\/span><\/p>\n

Global Depository Receipts (GDRs):\u00a0<\/strong><\/h3>\n

These are negotiable receipts issued against shares of foreign companies by financial institutions in developed countries.<\/span><\/p>\n

Futures<\/strong><\/h3>\n

Futures are exchange-traded contracts for buying\/selling assets at predetermined future dates and executed through clearinghouses, acting as intermediaries and ensuring contract compliance.<\/span><\/p>\n

Options<\/strong><\/h3>\n

Options are contracts providing the right (not obligation) to buy or sell underlying assets by a specified date, with a premium paid. Call options grant the right to buy, while put options grant the right to sell.<\/span><\/p>\n

Functions of an Equity Capital Market<\/strong><\/h2>\n

The various vital functions equity capital market performs are:<\/span><\/p>\n