Which types of securities are typically involved in ECM?

The inclusion of common stock, preferred stock, and equity-linked securities as the primary types of securities in Equity Capital Markets (ECM) highlights the focus of ECM on equity financing.

Common stock represents ownership in a company and provides shareholders with voting rights and potential dividends, making it a fundamental component of equity markets. Preferred stock, while also representing ownership, generally comes with fixed dividends and priority over common stock in terms of asset distribution upon liquidation. Equity-linked securities, which can include convertible bonds and warrants, offer investors the option to convert their investments into a company's equity, thus linking them directly to the company’s equity performance.

This focus on equity is critical in ECM, which primarily deals with the issuance of shares, whether through initial public offerings (IPOs), follow-on offerings, or private placements, facilitating companies in raising capital by selling equity rather than debt. The other options presented include securities that do not directly relate to the core function of ECM, such as bonds and mutual funds, derivatives and options, or real estate investment trusts, which serve different financing and investment purposes.