Investment banks | TradeLiga

The lesson in full

When a company needs billions to build factories, or a government needs to borrow, it rarely walks into a normal bank branch. It calls an investment bank.
Investment banks help raise money by selling new shares and bonds to investors. For an IPO, they help set the price, find buyers and earn a fee, often a few percent of the money raised.
They also advise on mergers and acquisitions, when one company buys or joins another, and trade bonds, currencies and shares for big clients. Goldman Sachs, JPMorgan and Morgan Stanley are famous names.
On 15 September 2008, Lehman Brothers, a bank with more than US$600 billion in assets, filed for bankruptcy: the largest in US history. A housing slump became a global financial crisis.
How it spread: US home prices fell, mortgage bonds lost value, banks that had borrowed heavily to hold them took heavy losses, and lending froze around the world.
Common mistake
Myth: "If a big bank sells an IPO, the shares must be a bargain." The bank is paid by the company selling. Facebook listed at US$38 in 2012 and was below US$20 within four months.
Key takeaway
Investment banks raise money, advise on deals and trade for big clients. They're powerful, but Lehman shows even giants can fail.

Investment banks help companies... Raise money and buy companiesThey sell new shares and bonds for companies and advise on mergers and acquisitions.
Which investment bank collapsed in September 2008? Lehman BrothersLehman Brothers filed for bankruptcy on 15 September 2008, the largest bankruptcy in US history.
Selling a company's new shares to the public is part of... An IPOIn an initial public offering, investment banks help a company sell its first shares to the public.
In an IPO, who pays the investment bank's fee? The company raising moneyThe company pays the bank, so the bank works mainly for the company, not for the buyers.