How Firms Issue Securities

When firms need to raise capital they may choose to sell (or float) new securities. These new issues of stocks, bonds, or other securities typically are marketed to the public by investment bankers in what is called the primary market. Purchase and sale of already-issued securities among private investors takes place in the secondary market.

There are two types of primary market issues of common stock. Initial public offerings, or IPOs, are stocks issued by a formerly privately owned company selling stock to the public for the first time. Seasoned new issues are offered by companies that already have floated equity. A sale by IBM of new shares of stock, for example, would constitute a seasoned new issue.

We also distinguish between two types of primary market issues: a public offering, which is an issue of stock or bonds sold to the general investing public that can then be traded on the secondary market; and a private placement, which is an issue that is sold to a few wealthy or institutional investors at most, and, in the case of bonds, is generally held to maturity.

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  • Anke
    How firms issue securities?
    3 years ago

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