While exploring the world of fixed income you may come across words or phrases your unsure of. Our jargon guide is here to help
Capital raisings were not always easy to access for individuals. That's changed and investors now have a wide variety of entry points into private and public capital markets.
Capital is the cornerstone of a company’s financial strength. Periodically, companies may need to raise capital for various purposes. Investors participate in capital raisings to fund companies’ operations or growth for financial benefits. Understanding different types of capital raising is the first step for investors entering capital markets.
Broadly speaking, companies need to raise both debt and equity capital, and they can go to either public or private markets for raise funds.
Refers to a publicly traded exchange, such as New York Stock Exchange or Australian Securities Exchange (ASX), where it allows a broader investor base to participate. Or it can also refer to Over-the-counter (OTC) market where buyers and sellers can trade with the facilitation of brokers or traders. Capital raisings in public markets can potentially reach a broader audience, while also being subject to more stringent rules and public scrutiny.
Refers to capital markets with participation limited to a small group of investors who must meet regulatory definition for eligibility. Different countries or regions might differ in their regulatory requirements for investors eligibility, but because of limited participation, regulators would exempt companies from issuing a Prospectus or other disclosure documents required in public market raising. Traditionally, private markets are only available to institutional investors. However, product innovation and new technologies have made private market opportunities more broadly available.
The list above is far from exhaustive. Advancement in capital markets means companies can choose from a variety of avenues to meet their capital needs, while offering investors a range of risk-return opportunities. In order to achieve a desired result, investors must decide the type of capital raisings that suits them.
Learn more: Understanding the basics of Capital Raisings
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