Thread by @CringleKitten

(Part 1) The inner workings of an investment bank

Let's talk about what an investment bank does. It's gonna lay out some foundations and make some pieces clearer on what happened recently with highly shorted securities with the issuance of shares including wealth creation.

(Part 2) Investment banking does three primary functions: underwriting securities, IPO & seasonal offering.

A company wants to issue shares. You need someone to vouch for you to buy a piece of your company. In some way, it's a reputation kind of thing.

This is underwriting.

(Part 3) The investment bank has contacts among people to make offerings worthwhile and they manage this issuance to make sure a company grows with liquidity.

(Part 4) If it's the first time issuing shares, it means a private company would want to go through an IPO (initial public offering). That same company would require an intermediary party to complete this process so it can be featured publicly on the stock market like RBLX.

(Part 5) Investment banking can also do seasonal offerings when a company has already filed periodical issuance with a precedented approval of its shareholders or if there was an existing pool left because insiders have sold their holdings.

(Part 6) There are two kinds of deal with investment banking: "Bought Deal" & "Best Effort".

A Bought Deal is when an investment bank just buys shares outright and resells them on the market with a profit.

(Part 7) A Best Effort is when an investment bank doesn't buy anything but will find a third-party who can purchase shares of said company with involved commission rates.

(Part 8) Just a free lesson on a Sunday morning!