In an IPO an investment bank takes a fee from a business to
place that stock in financial markets. Or,
more precisely, they take a fee from a business to sell part of that business. Their customer is the company doing an IPO
and they have a legal and moral obligation to get the highest price for the
company they are selling. No more. No less.
However investment bankers have, as a practical matter, a
desire to expand and improve their franchise. Their franchise consists of a
huge number of buy-side investors (some retail, some institutional) who will
buy from them whatever they sell so long as it comes in a prospectus….
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