- Investment Banking
- Commercial Banking
- Retail Banking
- Equity Research
- Sales & Trading
The sell-side essentially includes the wide variety of functions one might expect to find inside a bank. There’s not necessarily an order to think of them in, so we’ll simply go in order of size of deals and investments.
Investment banking refers to raising capital on large scales to fund companies and even other entities, such as funding governments.
A textbook example would be a company which has been growing for a number of years, and is ready to expand. They may need hundreds of millions of dollars or more to fund this expansion. This firm would hire an investment bank to help them figure out exactly how much money to raise, perhaps how to best use it, and then get them that money.
Fundamentally, there are two ways for the bank to get them the capital they need: equity and debt.
Equity Capital Markets
Equity is what you may have also heard called “stocks.” Equity refers typically to a piece of ownership of a company. So if a company has a million shares of stock outstanding and you own one, you own one-millionth of that company!
Private companies can use equity by going public, essentially allowing far more investors to buy their stock on public stock exchanges. By selling these shares of their company, they are now able to raise funding. This is often called an Initial Public Offering, or IPO.
Public companies can also sell more stock, sometimes called a follow-on offering. For example, If the company in the above scenario sold 500,000 shares of its stock for its IPO and needed more money several years down the line, they could choose to release another 200,000 shares to be sold to the public.