The equity capital market term refers to the interactions between entities requiring funding and those financial institutions that can assist with this search. The financial institutions act as facilitators to raise capital on behalf of their clients from the investment community. These entities may provide advice on a broad range of fund raising alternatives, including convertible debt, preferred stock, warrants, private placements, and the use of an initial public offering. Other entities are more specialized, concentrating their resources in a small number of areas of expertise.
Equity Capital Market (ECM) is a market that exists between companies and financial institutions that is used to raise equity capital for the companies. Some activities that companies operate in the equity capital markets include: overall marketing, distribution and allocation of new issues; initial public offerings, special warrants, and private placements. Along with stocks, the equity capital markets deal with derivative instruments such as futures, options and swaps.
Equity capital markets are very dependent on the information provided by companies regarding their current financial situations and estimates of future performance. Equity capital market teams from different investments banks are responsible for helping companies execute primary market transactions by managing the structure, syndication, marketing and distribution.
Equity capital market advisors can assist an entity that is seeking equity funding in all aspects of this search, including the development of a prospectus, improving the valuation of shares, marketing the prospective equity sale to investors, syndicating the sales among other entities, and distributing the shares.