The Primary Market

Tap to watch our overview of the major types of markets, and read on for more details.

The primary market is where securities are created and purchased directly from an issuing company. It is here where companies sell stocks to investors for the first time. Issuing securities through a primary market helps companies raise capital, reduce debt, invest in developing new products or fund their business goals. Another name for the primary market is the New Issue Market, or NIM.

Additionally, the primary market is the place where an issuer already trading can raise extra capital through seasoned equity offering (SEO). This is done either with shares sold by existing shareholders (non-dilutive), new shares (dilutive) or a combination of both.

Typically, there are three players in the primary market.

• Issuers: Companies offering new securities.
• Brokers: Entities handling the distribution of the new securities to investors who purchase them.
• Underwriters: Entities that oversee and facilitate the the distribution of stocks. Underwriters are responsible for evaluating stocks entering the primary market and thus decide on the initial price of their shares.