Chapter One
Supervision of Investment Banking: Primary Market
When a company would like to raise money by issuing a security, it has two general options.
First, the company can sell partial ownership in the business to others. The company does this by issuing tiny equal portions of ownership called “shares” or “stock” (the terms are used interchangeably and mean the same thing). Investors buy these shares and become partial owners of the company. The more shares an investor purchases, the larger the portion of the company they will own. In an accounting context, equity means what is left over after all debts have been paid, so equity financing can be seen as selling a stake in “what’s left over”: ownership in the business. It follows that raising money in this way – that is, selling ownership in