Financial Report of Verizon Inc - Essay Example

The company is listed on the New York Stock Exchange, one of the stocks that compose the Dow Jones Industrial Average (DJIA).  It came into existence as a result of several mergers and acquisitions.  Based on the latest Annual Report of the company, it has not issued shares of common stock using investment bankers or a syndicate of investment bankers, or at least there is no mention of any from accessible official documents; in fact, it has been known to be buying back its shares.  The only reference which could give one an inkling of common stocks being handled is this excerpt from its Notes to Financial Statements:

“The merger was accounted for using the purchase method by SFAS  No. 141, and the aggregate transaction value was $6,890 million, consisting of $5,829 million of cash and common stock issued at closing, $973 million of consideration for the shares.

Investment Dictionary defines a financial intermediary as an institution that acts as the middleman between investors and firms raising funds. Often referred to as financial institutions. Investopedia states that it can include chartered banks, insurance companies, investment dealers, mutual funds, and pension funds. building societies, credit unions and financial advisers or brokers. The investment banker also serves as a financial adviser and broker/dealer for companies and can be considered a financial intermediary for at least part of their business activities.

The investment banker, as an underwriter or agent, acts as an intermediary between the corporate issuer of securities (stocks or bonds) and the investing public. It performs this job either singly or as part of a syndicate as a manager or participating member thereof, making outright purchases of such securities from the issuing firm and distributing them to dealers and individuals as well as to institutional investors, such as pension funds, insurance companies, investment companies, on a firm commitment basis. It profits from the difference between the purchase price and the selling price offered to the public. It may also adopt a conditional arrangement called Standby Commitment whereby it serves companies issuing securities by agreeing to buy for resale any securities not taken by the shareholders possessing rights. Under a Best-Effort Arrangement, the investment banker sells the new issue without underwriting it, serving instead as an agent, not as a principal, employing its resources to sell as many securities as it can.

The investment banker can serve the issuing company in various ways: From pre-underwriting counselling to the distribution of securities, providing expert advice and guidance.  It may also prepare the registration statement to be filed with the Securities and Exchange Commission, and provide advice on how the security should be priced.  It can also organize and manage the syndicate and establish a selling group, as well as control and stabilize the issue price during the offering and distribution phase.

The investment banker may also handle the distribution of blocks of shares of previously issued securities in the secondary market or via negotiations, as well as act as a market maker for shares already distributed. Another activity is to serve as a resource for locating parties who would be interested in acquiring shares through private placements. An interesting aspect of their jobs is that of serving as brokers-dealers and advisors for wholesale and retail clients  By law, commercial banks may not serve as investment bankers.

Because of their vast resources, expertise, and credibility, large investment bankers can arrange mergers and acquisitions of companies. Large transactions such as those entered into by Verizon no doubt required the services of investment bankers.