Primary Market

Intermediate

The primary market is where new securities are created and sold for the first time, with the money going to the issuing company or government.

When a company sells new shares or a government issues new bonds, the sale happens in the primary market. The issuer receives the money raised, which it can use for investment, expansion or to repay other debts.

The best-known example is an initial public offering (IPO), when a company sells shares to the public for the first time. Other examples include later sales of new shares by listed companies, new bond issues by companies and governments, and auctions of new government bonds.

Investment banks often help issuers in the primary market. They advise on pricing, find investors and may guarantee to buy any securities that are not sold, a service called underwriting.

For example, if a company issues 10 million new shares at 20 each, it raises 200 million, minus fees, in the primary market.

Once securities have been issued, they trade between investors in the secondary market, where the issuer does not receive any money from the trades.

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