What are secondary shares?

They’re a company’s shares that are already being traded on a stock market rather than those that are newly issued, which are known as primary shares. The proceeds of a sale go to other investors rather than the company that issued the stock.

Where have you heard about secondary shares?

Secondary shares are bought and sold on the secondary market. National exchanges, such as the London Stock Exchange, are secondary markets, and share prices are set according to supply and demand.

What you need to know about secondary shares.

Trading of secondary shares doesn't result in an increase in total outstanding shares because no new securities are created. Therefore, they don’t dilute the value of the shares for existing shareholders.

Transactions that are carried out on the secondary market are classed as secondary purely because they're one step removed from the transaction that originally created the securities, such as an initial public offering. It doesn't mean they're inferior.

But be aware there is another use of the term to refer to stock that is considered riskier than blue chips because of smaller market capitalisation. These shares though are more usually referred to as mid-, small- or micro-cap stocks.

Find out more about secondary shares.

Read our definitions of secondary market and seasoned equity offering.