Guide to investment banking terms

If last year’s global economy were considered a “Goldilocks” economy, this year seems to be a different scenario; it has been all about the bears from the second quarter. In fact, this is the worst start for equities since 2010. Investors just woke up to the fact that there are indeed trends in the global economy working in the opposite direction. Global economy's hesitation appears to unnerve the global markets. For a change, let's do something else. Get into a learning phase. Here's a list that contains terms we need to know pertaining to investment banking:

Best-efforts underwriting — A type of underwriting agreement in which the underwriters only agree to use their best efforts to sell the shares on the issuer's behalf. The underwriters do not commit to purchase any unsold shares.

Float — The total number of a public company’s outstanding shares held by the general public. For example, if a company offers 10 million shares to the public in an IPO and has 20 million shares outstanding, it’s float (or public float) is 10 million shares.

Green shoe option — An over-allotment option granted to underwriters that allows them to purchase up to a specified number of additional shares from the company in the event that they sell more shares than allocated to them in the underwriting agreement. The Green Shoe Corporation was the first company to use this technique.

Initial public bankers — A corporation's first offering of stock to the public.