Raising Money Through Issuing Securities

The securities industry is fundamentally all about two sides of the same coin: raising money and investing money. On the raising money side, when an entity (e.g., corporation or government) would like to raise money, it has two basic options. First, the entity can sell partial ownership in the business to others. The entity does this by issuing individual, equal units of ownership called “shares” or “stock” (the terms are used interchangeably and mean the same thing). Investors buy shares and become partial owners of the entity. The more shares an investor purchases, the larger the portion of the entity she owns. Raising money in this way—by selling ownership to others—is called equity financing, and what is being purchased by investors—shares or stock—is called equity securities. Individuals and institutions invest in these equity securities, profiting by dividends and appreciation in the value of the securities. Equity securities are typically issued by corporations.

Selling ownership is not usually available to governments or governmental organizations, however, so municipalities do not issue equity securities. Instead, municip