Equity capital markets: raising shares, and reading the market for them

Primary market first¹

Most ECM work creates new securities: IPOs, capital increases and spin-offs. The team also handles the reverse - buybacks, capital reductions, share consolidations and delistings - and equity restructurings. In the secondary market it runs block trades, selling a large stake from one investor to many.

Convertibles and warrants sit here, not with the structurers¹

Convertible bonds and warrants are ECM products, often run jointly with DCM, because their issue - or later exercise - changes the company's capital structure. That is also why their valuation is more involved than a straight share or bond, and why they are not left to the derivatives structurers on the trading floor.

In the UK, existing shareholders come first²

Pre-emption rights, a cornerstone of UK company law, require new shares to be offered to existing shareholders in proportion to their holdings unless they vote to disapply them. The Pre-Emption Group's principles of 4 November 2022 support disapplying them for up to 10% of share capital for any purpose, a further 10% for an acquisition or specified capital investment, and 2% more for a follow-on offer to retail investors. Anything larger goes to existing holders first.

IPO investors take a different risk¹

A bond investor in a refinancing takes credit risk on a company it may already know. An IPO investor meets the company for the first time and takes the business risk itself. That is why an IPO needs a full roadshow, and a deep analysis behind it, to sell an equity story - the case for why investors should buy in.

Why the choice of bank matters to the issuer¹

A company's reputation can rest on its IPO. The German guide's examples are Deutsche Telekom's "people's share", still remembered years later, and Facebook, which drew hostile coverage when its shares fell after listing. Because the stakes are that visible, issuers pick the bank that looks most competent, and the pitch is as contested as in M&A.

Execution is coordination^1,3

The company has to be valued; lawyers and auditors engaged; the disclosure documents written; the roadshow set up; lock-ups agreed; the book built and the price set; and after listing the bank supports trading in the shares. Cleary Gottlieb's handbook covers the same ground from the legal side - timetables, market sounding, research, stabilisation structures and the underwriting agreement.

The lock-up keeps insiders from selling⁴

Before the IPO, insiders and large shareholders agree with the underwriter not to sell for a set period; most lock-ups run 180 days. Because the terms are disclosed in the prospectus, the market knows when the lock-up ends, and the share price can fall in anticipation of the selling.

Across the wall, carefully^1,3

ECM has occasional contact with the public side: sales can judge what their investor clients will buy, and research may support a sector view. The information barrier keeps that contact limited and controlled; the divisions page explains why the wall exists.

The market can close for months¹

In bad times primary equity markets freeze, sometimes for months. An ECM banker has to judge whether investor demand will carry a deal now, or whether it is wiser to wait for someone else to test the market. IPOs are postponed, sometimes more than once, after months of preparation - the guide cites Evonik - so frustration tolerance is part of the job description.

Doubly cyclical¹

ECM falls with the economy for two reasons at once: companies shelve listings, and the M&A that drives much of the demand for new equity dries up too.

ECM: market hours, and a harder route to the buy side^5-7

Equity capital markets runs IPOs, follow-ons and convertibles, and IPO-focused teams tend to keep something closer to market hours, around 12 a day. The trade-off is the exit: the skills do not overlap much with private equity work, and ECM analysts more often move into investor relations or ECM roles elsewhere. 2025 was a strong year for the product, with ECM volumes up 21% and revenues up 18% to their highest since 2021.

M&A skills, plus a feel for the market¹

The requirements are close to M&A's - analytical thinking, comfort with numbers, sound corporate finance - with derivatives and accounting as a plus, and an interest in studying many companies and sectors. What ECM adds is proximity to the markets, and the patience to see deals delayed for reasons nobody in the room controls.

What an ECM interview adds⁸

Expect the IPO process, how a book is built and priced, why a company would list or raise equity rather than debt, and dilution. The question bank's ECM topic has the questions.