The New Issue Market is also known as this market. This is the part of capital market that deals directly with the issuers of securities. Investors can buy securities that have never been traded before.
In order to raise capital, the securities are first issued by companies. This is also called Initial Public Offering. The primary market allows companies, governments and public sector institutions to raise funds by selling new bonds or stock issues. The primary market creates and sells securities.
You can issue the issue in a number of ways: public, private, preferential, rights or bonus.
While a public issue doesn't limit investors (individuals, corporations, and organizations), private placement entitles a select few to invest.
The securities are directly issued to investors by companies. Therefore, the company receives the money from the investor and issues a certificate of security.
After the closing of the issue of securities, the securities can be traded on the secondary markets, such as the stock exchange, bond market, or derivative exchange.
A company that sells its securities to raise funds through an issue document. Further, it can be classified as:
It is called the right issue when a company listed makes an issue only to existing shareholders.
A preferential issue is when a company lists securities for a select group of people in order to raise additional money.
To raise capital for expansion, companies turn to the primary markets. Each company needs capital to expand and grow.
Capital can be represented as:
The primary market funds go directly to the issuing company. This is where capital formation occurs.
We have now fully understood what primary market is. Let's now look at some related terms within the primary market.