Editing Primary market

{{Short description|Market for direct issue of securities}}The '''primary market''' is the part of the [[capital market]] that deals with the issuance and sale of [[securities]] to purchasers directly by the [[issuer]], with the issuer being paid the proceeds.<ref>{{Cite web|url=https://www.investor.gov/introduction-investing/investing-basics/glossary/primary-market|title=Primary Market|publisher=U.S. Securities and Exchange Commission}}</ref> A primary market means the market for new issues of securities, as distinguished from the [[secondary market]], where previously issued securities are bought and sold. A market is primary if the proceeds of sales go to the issuer of the securities sold.<ref name="auto">[https://www.oregonmetro.gov/sites/default/files/2018/03/08/Metro-Code-chapter-7-03-updated-03072018.pdf "Section 7.03.120 - Definitions; Primary Market"]</ref> Buyers buy securities that were not previously traded.

== Concept ==

[[File:B&O RR common stock.jpg|thumb|[[Stock certificate]] for ten shares of the [[Baltimore and Ohio Railroad|Baltimore and Ohio Railroad Company]]]]
In a primary market, companies, governments, or public sector institutions can raise funds through [[bond issue]]s, and corporations can raise capital through the sale of new [[Share capital|stock]] through an [[initial public offering]] (IPO). This is often done through an [[investment bank]] or [[underwriter]] or [[syndicate#Finance syndicates|finance syndicate]] of securities dealers. The process of selling new shares to buyers is called [[underwriting]]. Dealers earn a commission that is commonly built into the price of the security offering, though it can be found in the [[prospectus (finance)|prospectus]].<ref name=":0" />

IPOs are not the only way new securities are issued. Publicly traded companies can issue new shares in what is called a ''primary issue'' of debt or stock, which involves the issue by a corporation of its own debt or new stock directly to buyers like [[pension funds]], or to private investors and shareholders.<ref>{{Cite news|url=http://www.eiiff.com/primary-market/|title=What is Primary Market ? - Definition and Meaning|work=World Finance|access-date=October 20, 2018|language=en-US}}</ref><ref>''Fundamentals of Corporate Finance'', McGraw Hill, 2001</ref>

Since the securities are issued directly by the company to its buyers, the company receives the money and issues new security certificates to the buyers. The primary market plays the crucial function of facilitating capital formation within the economy. The securities issued at the primary market can be issued in ''face value'', ''premium value,'' or ''at [[par value]].''

Primary markets create long-term instruments through which corporate entities raise funds from the capital market.<ref name=":0">{{Cite news|url=https://www.investopedia.com/terms/p/primarymarket.asp|title=Primary Market|date= April 2, 2022|work=Investopedia|language=en-US}}</ref> It is also known as the New Issue Market (NIM).<ref name=":1">{{Cite news|url=https://corporatefinanceinstitute.com/resources/knowledge/trading-investing/primary-market/|title=Primary Market - How New Securities are Issued to the Public|work=Corporate Finance Institute|date= January 28, 2022|language=en-US}}</ref>

Once issued, the securities typically trade thereafter on a secondary market such as a [[stock exchange]], [[bond market]], or [[derivatives exchange]].<ref name=":0" />

== Raising funds ==
Corporate entities raise funds from the primary market in three ways:<ref name=":1" />

# '''Public issue''': a stock exchange lists the securities, and the corporation raises funds through initial public offering (IPO).
# '''Rights issue''': existing shareholders are offered more shares at a discounted price and on a ''pro rata'' basis.
# '''Preferential allotment''': a corporation issues shares at a price which may or may not be related to the current market price of the same security.

==See also==
*[[Secondary market]]
*[[Third market]]
*[[Fourth market]]

==References==
{{Reflist}}

{{Financial markets navigation}}
{{Authority control}}

[[Category:Financial markets]]
[[Category:Stock market terminology]]


{{Econ-stub}}