The primary market, often referred to as the "new issue market," is where companies issue new securities to the public for the first time, allowing them to raise capital directly from investors.
Features of new issue market are as follow:
1. Public Issue: The company that issues its stocks offers them directly to the public.the company offers a fixed number of shares, and capital is mentioned in the company’s prospectus.
When the company issues its share in the market, interested investors take the company’s prospectus. In the prospectus, investors can see details of the company, which will help the investor to decide.The organization guarantees the issue shares at the market value.
2. Offer for Sale: The company sells its shares through brokers or issue houses. the sale of shares of the company is guaranteed by the underwriters. The companies offer shares to the brokers at lower prices, and brokers earn huge interest by selling the shares.
3. Private Placement: Some investors are involved in private placements, such as insurance companies, mutual funds, and banks. In the public issue, the shares are issued to the public, but it doesn’t happen in a private placement. in private placement, there is no role of underwriters and prospectus. The brokers and issue houses take responsibility for selling the company’s shares.
4. Right Issue: When an old company that already has shareholders wants to release more shares in the market is called the right issue. The company takes permission from SEBI and then issues its right shares in the market.
5. Book Building: The underwriter analyzes the demand and supply of the company shares during the initial public offering. In book building, the company invites bids from merchants to sell their shares instead of offering shares to the public. After buying the shares, it is the responsibility of the merchant to sell the shares of the company.
