The stock market is divided in two different markets known as the primary equity market and the secondary equity market. The primary equity market is used for offering new equity issues in the market. This market provides the companies the source of generating funds for the business purpose.
At the same time, the primary equity market along with the secondary market help the investors to get a share in the company which is offering the shares. The investor can also make good amount of money from this market.The primary equity market is also termed as the New Issue Market or NIM because the Initial Public Offerings are meant for this market.
Also Explore: Primary Market
This market is a source of long term debt for the companies and because of this, the market can also be termed as long term debt market. The securities which are designed for the public and are introduced through the primary equity market are of two types.
When any new stock is introduced in the market, it is called the Initial Public Offering. At the same time offering new issues of existing stocks to the purchasers are known as underwriting.
The growing number of companies offering IPOs in the primary equity market represents the growth of the global equity market itself. The growth of the primary equity market is dramatic in the developed countries and at the same time. The number of IPOs are rising in the developed countries. Along with this, the mechanism of the primary equity markets has also developed and the competition between various primary equity markets are rising rapidly. This growth of the IPOs also represent the fact that the companies are preferring to generate funds through the primary equity market than to go to the financial organizations or commercial banks.
Also Explore: IPO Process
Introducing of IPOs in the primary equity market is done through a particular process. According to this process, a syndicate of the securities dealers should perform the job. Because of their services the securities dealers receive a certain amount of money as their commission. The price on which the IPO is offered in the primary equity market includes the dealer’s commission also.
Last Updated on : 22 July 2016