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That’s not accurate at all. Investment banks rarely participate in fund raising rounds. They don’t usually hold a stake in the company at all. The way they make
by URSpider94 5y ago
That’s not accurate at all. Investment banks rarely participate in fund raising rounds. They don’t usually hold a stake in the company at all. The way they make money is typically by charging a 6% commission on the shares that are floated in the IPO. The higher the IPO price, the higher their commission.
- vmception 5y agoWhat do the underwriters do and are they not investment banks?
- URSpider94 5y agoInvestment banks are the underwriters. They do in fact buy the IPO shares from the company and re-sell them, but the mark-up for that resale is on a commission basis, customarily 6%. It’s not like they are buying the shares at price x and then trying to sell them at price y. The round is priced jointly between the underwriter and the IPO’ing company based on orders obtained during the road show.