What is meant by primary market ? Explain any two methods of floating new issue in the primary market.
What is meant by primary market ? Explain any two methods of floating new issue in the primary market.
Primary market is a market which deals in new securities, being issued for the first time. The important function of a primary market is to facilate the transfer of investible funds from savers to entrepreneurs, seeking to establish new enterprises or to expand existing ones through issue of securities.
There are various methods of floatation of new issues in the primary market, two of which are as follows:
(i) Offer through prospectus: Under this method, a company invites subscription from the public through issue of prospectus.
A prospecus makes a direct appeal to investors to raise capital through an advertisement in newspaper and magazines.
(ii) Offer for sale: Under this method,securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells the entire securities en-block at an agreed price to the intermediaries, who, in turn, resell them to the investing public.
Primary market is a market which deals in new securities, being issued for the first time. The important function of a primary market is to facilate the transfer of investible funds from savers to entrepreneurs, seeking to establish new enterprises or to expand existing ones through issue of securities.
There are various methods of floatation of new issues in the primary market, two of which are as follows:
(i) Offer through prospectus: Under this method, a company invites subscription from the public through issue of prospectus.
A prospecus makes a direct appeal to investors to raise capital through an advertisement in newspaper and magazines.
(ii) Offer for sale: Under this method,securities are not issued directly to the public but are offered for sale through intermediaries like issuing houses or stock brokers. In this case, a company sells the entire securities en-block at an agreed price to the intermediaries, who, in turn, resell them to the investing public.
