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Finance GlossaryEquity Capital Markets
Equity Capital Markets
Definition of Equity Capital Markets
Equity capital markets (ECMs) are a place where companies raise money by offering equity shares to financial firms, institutional investors, and retail investors.
Fund raising of this kind is often done through private placements or Initial Public Offerings (IPOs) in the primary market, which is a part of the ECM. The biggest IPOs in India are all part of the ECM.
The equity capital market is also a place where shares, futures, options, and other financial instruments are traded. This part of the ECM is known as the secondary market. The stock market is a popular example of an ECM.
Fund raising of this kind is often done through private placements or Initial Public Offerings (IPOs) in the primary market, which is a part of the ECM. The biggest IPOs in India are all part of the ECM.
The equity capital market is also a place where shares, futures, options, and other financial instruments are traded. This part of the ECM is known as the secondary market. The stock market is a popular example of an ECM.
Related Terms
Mean Absolute Deviation
Mean Absolute Deviation (MAD) is a statistical measure that shows how much the values in a data set differ from the average. It is calculated by taking the average of the absolute differences between each value and the mean.
Founders Stock
The term founders stock refers to shares issued to the founders of a company. This type of stock is issued at face value and carries a vesting period, which is a lock-in period during which the shares cannot be sold.
During this period, the founders stock may not earn any returns, unless there are dividends attached to it. Founders stock is not an accounting term - it is used colloquially to denote the shares issued to founders.
During this period, the founders stock may not earn any returns, unless there are dividends attached to it. Founders stock is not an accounting term - it is used colloquially to denote the shares issued to founders.
Market Capitalization
Market Capitalization (or Market Cap) is the total value of a company in the stock market. It is calculated by multiplying the total number of outstanding shares by the current share price. For example, if a company has 1 crore shares priced at ₹100, its market capitalisation is ₹100 crore.
Non-Voting Shares
Non-Voting Shares are shares that give investors ownership and dividend rights but do not grant the right to vote on company matters. These shares are often issued to raise capital without diluting control, allowing founders or promoters to retain decision-making power while offering economic benefits to shareholders.
Value Trap
A value trap occurs when a stock appears cheap based on valuation metrics but continues to underperform due to underlying business problems. For example, a company with declining revenues and poor management may trade at low price-to-earnings ratios, misleading investors into thinking it offers value when its fundamentals are deteriorating.
Undervalued
A stock is considered undervalued when its market price is lower than its intrinsic or fair value based on fundamentals such as earnings, cash flow, or assets. For example, if a company with strong profits and stable growth trades below its historical valuation multiples, investors may view it as undervalued and expect price appreciation.
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