investment banker

noun
Updated on: 13 Oct 2017

Definition of investment banker

1 :a person employed by an investment bank or engaged in investment banking

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Financial Definition of INVESTMENT BANKER

investment banker

What It Is

The role of an investment banker is to serve as a middle-man between prospective investors and companies that intend to raise capital through the issuance of new stock. Investment bankers are often employed by and represent investment banks.

How It Works

When a company plans to raise capital funds by issuing new shares of stock, investment bankers take on the role of intermediary between the company and the investors who may want to buy the stock. This process is called underwriting and is usually carried out by several investment bankers who are employed by and work as agents for an investment bank participating in an underwriting syndicate.

To illustrate, suppose company XYZ needs to raise extra capital for their operations. They decide to issue a new line of stock called XYZ Premium Shares. Company XYZ subsequently solicits an investment bank whose employees market the new shares of stock to existing clients and other prospective investors. Additionally, these investment bankers will often solicit other investment banks to participate in the deal in order to form the underwriting syndicate.  In selling the new shares of stock, the investment bankers are helping company XYZ to access the capital markets and thereby raise the capital funds it intended to raise by issuing the new stock.

Why It Matters

Companies that plan to raise funds through initial public offerings (IPOs) usually do not have the expertise or the authority to issue shares of stock directly to the public. Investment bankers possess the marketing and financial expertise to successfully manage a company's stock offering in order to raise capital from the capital markets.


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