Chris HarounProfessor and CEO at Haroun Education Ventures

What Is an Investment Bank? 🏦💰

Name: What Is an Investment Bank? 🏦💰
Uploaded: 2024-10-30T16:25:09+00:00
Duration: 59 s
Channel: Chris Haroun
Description: In this segment, Chris Haroun explains the core role of investment banks as intermediaries that help companies raise large amounts of capital. Using a…

30 Oct 2024 · 1 min

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In this segment, Chris Haroun explains the core role of investment banks as intermediaries that help companies raise large amounts of capital. Using a hypothetical company, Ice Juice, which seeks to raise $9.6 billion, he outlines two primary routes: a debt raise (issuing bonds) and an equity raise (initial public offering). He illustrates each route with real‑world examples—Morgan Stanley’s underwriting of Facebook’s 2012 IPO for equity, and JP Morgan’s issuance of U.S. government war savings bonds in 1945 for debt. Haroun emphasizes that without an investment bank, a company cannot efficiently access such massive funding.

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Investment banks help their clients raise a lot of money. Let's assume that Ice Juice wants to raise $9.6 billion of cash and the use of proceeds will be to open many more. Press juice stores as fast as possible so they have a first mover advantage in many different markets. There's no way that companies can raise that much money without hiring an investment bank. And so companies can raise a lot of money by hiring an investment bank to either raise money for an ipo, like what Morgan Stanley did with Facebook here in their 2012 IPO. Companies can issue debt like a bond, like what JP Morgan did in 1945 for this United States Government War savings bond. So Ice Juice can either have investment bankers do a $9.6 billion debt raise, meaning by issuing this bond here, or what they can do is the investment banks can raise $9.6 billion for Ice Juice by doing an IPO.