when a company works with an investment banker for the ipo the investment banker s firm buys the shares from the client at an agreed upon price based on how the firm s analysts value the company and how much they expect shares of the stock to be worth then on the day of the ipo the firm sells those shares to the public at a higher price than it paid to make a profit 
as an example suppose that pete s paints co wants to go public pete the owner gets in touch with catherine a prominent investment banker pete and catherine strike a deal in which catherine on behalf of her firm agrees to buy 100 000 shares of pete s paints for the company s ipo at the price of 24 per share based on her analyst team s recommendations the investment bank pays 2 4 million for the 100 000 shares after filing the appropriate paperwork such as sec form s 1 and setting the ipo s date and time catherine and her team offer the stock into the open market at 26 per share if the market supports the 26 per share price catherine s firm would make 2 6 million from the ipo for a profit of 200 000 however if public demand is weak the firm might not be able to sell all the shares at this price catherine and her team would be forced to reduce the price to sell the rest of the holdings in this case the firm could incur a loss on the sale but pete s paints co would still receive 2 4 million required skills for investment bankersthe investment banking field is popular because investment bankers are typically well paid however these positions require specific skills such as investment bankers must abide by their firm s stipulated code of conduct and ethics because of the sensitive nature of the information they receive they must typically sign a confidentiality agreement for each client moreover there is potential for conflict of interest if the advisory and trading divisions of investment banks interact a hierarchy of positions typically exists in investment banking these positions usually go from analyst from junior to senior associate vice president senior vice president and then managing director 