12 April 2024

Equity Capital Markets (ECM): What are they, and how do they work?

Equity is one of the most strategic financial instruments when it comes to raising financing for companies and institutions in the capital markets.

Equity Capital Markets allow companies to raise capital through financial institutions. It is the principal market for private placements and IPOs, as well as for secondary transactions in existing shares, futures, options, and other listed securities. Shares are primarily traded on stock exchanges, which are organized markets where buyers and sellers meet to conduct these types of transactions. Some of the most important stock exchanges in the world are the New York Stock Exchange (NYSE), NASDAQ in the United States, the London Stock Exchange in the United Kingdom, and the Tokyo Stock Exchange in Japan.

In a context of economic recovery and optimism in the financial markets, primary Equity Capital Markets (ECM) are emerging as key players in the reactivation of the business fabric. According to EY's Q1 2024 analysis, it is anticipated that during the first three months of the year, there were improvements in valuations and price levels, which may generate growing confidence among both issuers and investors. 

How do BBVA CIB's ECM teams operate?

BBVA CIB offers all its expertise and know-how to advise and execute first class solutions in Equity Capital Markets. The main services offered by the teams range from IPOs and rights issues, to accelerated placements, including convertible bonds and scrip dividends.

BBVA has an advisory team in Equity Capital Markets that is committed and aligned with the interests of its corporate clients, which allows it to offer clear, honest and unbiased advice.  The methodology carried out by BBVA CIB is based on data analysis and the combination of specialists in financial products with experts in specific sectors, always focused on establishing lasting relationships with clients.

A reflection of the importance that the bank attaches to these types of solutions in the Equity Capital Markets is the strategic alliance that BBVA forged for Spain and Portugal with ODDO BHF in 2021, one of Europe's leading equity analysis and distribution platforms. The objective of this strategic alliance was to strengthen the capabilities for transactions in the primary market and to be a relevant advisor to the bank's clients. Currently, and after three years of joint work, this platform covers more than 700 listed companies in Europe, of which 80 are Iberian, and has access to a wide global base of around 750 institutional investors.

IPOs: a classic of the ECM

The main reason behind a company's decision to go public is usually to access funding from the capital market to fuel its expansion and secure the resources needed to execute its business strategy.  It also allows its private shareholders the possibility of monetizing part of their stake, crystallizing their gains and diversifying their net worth.  

BBVA CIB is a relevant player in the Spanish equity capital markets, having participated in more than 30 share offerings in the last decade, leading many of them, and having been a key player in the privatization process in the Spanish market in previous decades. BBVA's Equity Capital Markets execution team has a long track record and experience in this type of process, which together with the strengths of institutional distribution, guarantees excellence in the execution of equity offerings.