What are primary shares?
'Primary shares' is an expression that describes the first issuance of stock by a company seeking to raise capital from investors. Those buying the shares become part-owners of the business and the cash they subscribed for the stock is paid over to the company.
Where have you heard about primary shares?
As an investor, you will be well aware of the issue of primary shares and the role it plays on both raising funds for business and providing opportunities for those looking to invest in growing companies. Your financial adviser may draw your attention to new issues of primary shares.
What you need to know about primary shares.
Primary shares represent the first sale of part or all of a company to outside investors. Once they have been sold, they are traded on secondary markets, among investors who buy and sell the stock. None of the proceeds of these later trades goes to the issuing company. However, secondary share issues by the same company can bring in extra capital, but because these secondary shares would dilute the stakes of the primary shareholders, these existing shareholders will usually have to give their permission for the secondary issue. The price at which the primary shares are trading may well inform the pricing of any secondary issue.
Find out more about primary shares.
Primary shares are sold to investors in an initial public offering (IPO). Learn more about initial public offerings here.