The trading of company stock to the public has been going on for more than 200 years (NYSE, 2006). Over the years the supply chain for buying and selling equity stock has changed with innovations in technology. Today, the old brick and mortar environment of equity trading is being replaced by virtual trading through websites like Ameritrade, E-Trade, and TradeStation.
Brick and Mortar
When a privately held company needs money to expand their business, quite often they choose to sell part of the company through a public stock offering. To facilitate this process an investment banker is most often involved helping value the company and determine the price of each share of stock. Once the value of each share of stock is determined and the amount of funds needed by the company are complete, the investment banker forms a syndicate of broker/dealers who take on the responsibility of either purchasing all the shares of stock the company has to offer or to help sell in an initial public offering.
The investment banker and syndicate members receive a concession for each share of stock sold (NASD, 2006). For example, if one share of stock is being offered at a price of one dollar, the investment banker and syndicate may split a 20 cent concession for their efforts.
The process in which the stock is offered to investors prior to the development of the Internet was generally through brokers calling investors via the telephone. Another common way was the actual store front or office of a broker/dealer where individual investors could actually walk into an office and purchase new stock offerings directly. These offices were branch offices of a much larger firm like Merrill Lynch, Morgan Stanley, and Charles Schwab who might have been members of the offering syndicate.