Primary Market : Meaning, What is Primary Market, Features of Primary Market, Function of Primary Market, Conclusion
There is a very important term often will hear as Primary Market when you start investing in the stock market. Let’s know discuss the primary market.
What is the primary market? The primary market is linked to the stock market, it is a platform through which private companies go public for the first time and investors can buy shares directly from the companies.
Private companies go public by depositing funds from investors, some people consider the primary market a curse and some consider it a boon.
In the absence of knowledge and information, people consider the stock market to be complex, but it is not that complicated If seen and understood in the true sense.
Meaning of Primary Market
Primary market is also known as the new issue market (NIM), It is a market where funds are raised through shares, debentures and bonds by industrial enterprises.
This market is concerned with new or first-time issue equity-like shares, bonds, and debentures.
The primary market is a market where shares, bonds or debentures are issued for the first time.
Individual companies that become public first time be listed on the stock exchange from the primary market.
The primary market is a part of the stock market where investors can buy securities directly from companies.
What is primary market ?
When a company needs money to carry on its business or start a new business, that company issues new shares or debentures to meet that need and sells shares or debentures directly to investors.
Simply put, the primary market is the place where securities are brought into existence.
The primary market is a gateway, where entities such as companies, governments, and institutions can first-time enter the public sector.
Features of Primary Market
The Primary market is concerned with long-term capital because companies raise the fund to enhance their business, pay the loan or set up factories.
Securities are sold for the first time in the primary market. In the primary market, securities are directly issued to investors.
Companies raised funds from the primary market to enhance business and become public.
Functions of Primary Market
Origination function: build guidelines for new issue securities, investigate the company that wants to be raised funds from the public.
Underwriting function: It is an agreement where the underwriter promises to subscribe to a specific number of shares, debentures, or a specified amount of stock, in the event of the public not subscribing to the issue.
Distribution functions: In this function of the primary market ensures how to reach new issue securities with investors. It may be public issues, offers of sale etc.
Primary market is a way to raised capital from investor to enhance the business. If a company want to become public, it can become public through primary market.
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