Definition of Investment Banker

What is an Investment Banker

An investment banker is a financial professional who works in a sector of the investment industry known as investment banking. Their primary role is as an intermediary for governments, corporations and other entities in raising capital, which is done primarily through issuing securities and selling securities in the capital markets. They also play a key role in advising clients on various transactions such as mergers, acquisitions and other types of financial restructuring.

Investment bankers operate within financial institutions known as investment banks. These banks are unique in the investment industry because they do not take deposits. Instead, they specialize in large and complex financial transactions in the capital markets. Investment bankers play a key role in both equity and debt securities markets.

Investment Banker Role in Equity Security Markets

• Initial Public Offerings (IPOs): Investment bankers often lead the process of taking a company public, which involves selling shares of the company's stock to the public for the first time. They help to determine the price of the shares, arrange for the shares to be listed on a stock exchange and often buy the shares themselves before selling them to investors.
• Follow-On Equity Offerings: After a company is already publicly traded, investment bankers can help the company to raise additional capital by selling more shares in follow-on offerings.
• Private Placements: In a private placement, a company sells equity securities to a select group of investors, rather than to the public at large. Investment bankers can facilitate these transactions by finding investors and negotiating the terms of the deal.
• Mergers and Acquisitions (M&A): When a company wants to acquire another company, it will often pay for the acquisition with its own shares. Investment bankers can advise on these transactions, helping to determine the value of the companies involved and the structure of the deal.

Investment Banker Role in Debt Security Markets

• Issuance of Bonds: Investment bankers assist in issuing bonds, which are a type of debt security. They help determine the terms of the bond, buy the bonds from the issuer and sell the bonds to investors.
• Trading and Market Making: Investment banks often have bond trading desks that buy and sell debt securities, providing liquidity to the market.
• Debt Restructuring: In cases where a company is struggling to repay its debts, investment bankers can advise on restructuring the company's liabilities, which might involve issuing new bonds.
• Securitization: Investment bankers help companies securitize their debt, converting it into securities that can be sold to investors.

In all of these roles, investment bankers act as intermediaries between companies and investors, helping to ensure that the capital markets function smoothly.

Final Thoughts on Investment Bankers

Investment bankers play a crucial role in the world of finance, acting as a bridge between entities that need capital and the investors who can provide it. Their knowledge of financial markets, securities laws and regulations and their relationships with clients makes them indispensable in the world of high finance. Their work is demanding and often involves high-stakes decisions but it can also be financially rewarding, making investment banking a popular career choice in the finance field.

GlobEx Markets Financial Dictionary of Terms, Phrases and Concepts

The GlobEx Markets financial dictionary is a reference resource that provides the definitions and explanations of various financial terms, phrases and concepts that are used in international finance and global investing. It includes a broad range of financial terms, such as those related to stocks, bonds, currencies, commodities, options, futures, crypto and much more.

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Related Investment Terms

Capital Market

Initial Public Offering

Market Risk