Are you new to the world of investing? If so, you may be wondering what the difference is between the primary market and secondary market. In this blog post, we’ll explain the difference between these two markets and why it’s important to know the distinction.
Primary Market and Secondary Market
Do you know what is the difference between Primary Market and Secondary Market so far you have only heard about the share market but Primary Market vs Secondary Market is also a part of the Stock Market. When any company wants to be listed in the Stock Market, then it issues its Shares in the Primary Market, after which we go to the Secondary Market where you and we trade. So today in this post, we will try to understand easily what Primary Market and Secondary Market are and the difference between Primary Market and Secondary Market.
What is Primary Market?
A primary market is a market that issues shares of any company for the first time. In the primary market, the company or its promoters do their Shares issue with the main 4 types of method. The first method of which is IPO. An IPO means that any company wants to sell its shares to the public for the first time in the stock market.
The second method is Offer for Sale. OFS means that promoters of any company already listed in the stock market sell their shares to the public to reduce their stake. Its third method is Private Placement. In Private Placement, the promoters of the company sell themselves to only a few selected people, in this, individual shares like you and you cannot buy. Its fourth method is the Right Issue. Right Issue is of the view that a previously listed company issues its shares only to its shareholders.
There may be a question in your mind that why any company wants to sell its shares. The simple answer is When a company wants to expand itself and invest in its plans then it needs money, then that company has two ways to raise funds for its day-to-day operation and its future plans. First, They take a loan from a bank, and secondly to issue their shares in the stock market.
IPO:- An IPO is a way in which a company sells its shares electronically for the first time. Firstly, the company has to take the approval of the Sebi and issue a share at a fixed price after being approved, in which any investor will be investing his company throws IPO by bidding.
OFS:- Offer for Sale is a process in which promoters of any listed company want to reduce their stake by OFS. Promoters sell their shares to Direct Public by a share bidding process through Offer for Sale. This process of share transaction is done through a broker.
Private Placement:- Private placement is a way in which promoters sell their shares to only a few selected people, in which no individual can buy their shares.
Right Issue:- Right issue is a process in which any listed company does a new Shares issue again, in which the company first issues its old Share Holders to the new shares issued, and this process is called Right Issue.
An important point about Primary Market
- The Place where a company sells its shares for the first time to the public Through an IPO.
- Only One’s Shares can be Sold.
- Price is Fixed.
- Shares are Buying & Selling between Company and Investor.
What is a Secondary Market?
A secondary market is a market where any company issues its shares for the first time in the Primary Market, only then those shares are available to us to trade in the Secondary Market. Understand this in easy language, where you and we trade, it is called secondary market and it is also known as share market.
An important point about Secondary Market
- The Place where formerly issued Shares are traded is known as the Secondary Market.
- Multiple times Shares can be Sold.
- Price is fluctuating depending on the Demand and Supply Force.
- Investor to Investor