what is the equity capital market ecm 
the equity capital market ecm refers to the arena where financial institutions help companies raise equity capital and where stocks are traded it consists of the primary market for private placements initial public offerings ipos and warrants and the secondary market where existing shares are sold as well as futures options and other listed securities are traded understanding equity capital markets ecms the equity capital market ecm is broader than just the stock market because it covers a wider range of financial instruments and activities these include the marketing and distribution and allocation of issues initial public offerings ipos private placements derivatives trading and book building the main participants in the ecm are investment banks broker dealers retail investors venture capitalists private equity firms and angel investors together with the bond market the ecm channels money provided by savers and depository institutions to investors as part of the capital markets the ecm leads in theory to the efficient allocation of resources within a market economy the primary equity market where companies issue new securities is divided into a private placement market and a primary public market in the private placement market companies raise private equity through unquoted shares that are sold to investors directly in the primary public market private companies can go public through ipos and listed companies can issue new equity through seasoned issues 1private equity firms may use both cash and debt in their investment such as in a leveraged buyout whereas venture capital firms typically deal only with equity investments the secondary market where no new capital is created is what most people typically think of as the stock market it is where existing shares are bought and sold and consists of stock exchanges and over the counter otc markets where a network of dealers trade stocks without an exchange acting as an intermediary 2advantages and disadvantages of raising capital in equity marketsraising capital through equity markets offers several advantages for companies the first one is a lower debt to equity ratio companies will not need to access debt markets with expensive interest rates to finance future growth equity markets are also relatively more flexible and have a greater variety of financing options for growth as compared to debt markets in some instances especially in private placement equity markets also help entrepreneurs and company founders bring in experience and oversight from senior colleagues this will help companies expand their business to new markets and products or provide needed counsel but there are also problems with raising capital in equity markets for example the route to a public offering can be an expensive and time consuming one numerous actors are involved in the process resulting in a multiplication of costs and time required to bring a company to market 3added to this is the constant scrutiny while equity market investors are more tolerant of risk as compared to their debt market counterparts they are also focused on returns as such investors impatient with a company that has consistently produced negative returns may abandon it leading to a sharp drop in its valuation equity capital faqscompanies seek to raise capital in order to finance their operations and grow equity funding involves exchanging shares of a company s residual ownership in return for capital debt funding instead relies on borrowing where lenders are repaid principal and interest without receiving any ownership claim in general equity capital is more expensive and has fewer tax benefits than debt capital but also comes with a great deal of operational freedom and less liability in the case that business fails the equity of a company or shareholders equity is the net difference between a company s total assets and its total liabilities when a company has publicly traded stock the value of its market capitalization can be calculated as the share price times the number of shares outstanding equity can be categorized along several dimensions private equity differs from publicly traded shares where the former is placed via primary markets and the latter on secondary markets common stock is the most ubiquitous form of equity but companies may also issue different share classes including allocations to preferred stock capital is any resource including cash that a company possesses and uses for productive purposes equity is but one form of capital 