Types of Issues made in Primary Market

Securities market or the stock market as it is commonly known shares or securities are issues. The primary market is also called as the new issues market where company/institutions raise funds (capital) from the public by issuing new securities (shares, debentures, bonds, etc.). The types of issues made in the Primary Market are as follows:

Public Issue

Securities are issued to all the people and anyone can subscribe to them. Public issue of equity shares can be categorized as follows:

Initial Public Offer (IPO) where the first public offer of shares is made by a company. An IPO can be in the following forms:

– Fresh Issue of shares where new shares are issued by the company to the public investors. In this kind of an issue, the funds of investors will go to the company to be used for the purpose for which the issue is made.

– Offer for Sale where existing shareholders such as promoters or financial institutions or any other person offer their holding to the public. In this kind of an issue, the funds of the investors will go to such sellers of the shares and not to the company.

Follow on Public Offer (FPO): It is made by an issuer/ company that has already made an IPO in the past and is making a fresh issue of securities to the public.

Preferential Issue

In this mode of issue, securities are issued to an identified set of investors like promoters, strategic investors, employees, etc.

Rights Issue

When the Company gives its existing shareholders the right to subscribe to newly issued shares, in proportion to their existing shareholding, it is called as a rights issue.

Bonus Issue

When the existing shareholders of a company are issued additional free shares, in proportion to their existing shareholding and without any additional cost, then it is called a bonus issue.

The securities which are issued in the primary market are listed on a recognized Stock Exchange in less than six (06) working days from the date of the closure of the issue. The shares are then listed on the recognized stock exchanges, where further trading of the shares takes place.

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A.Sulthan, Ph.D.,
Author and Assistant Professor in Finance, Ardent fan of Arsenal FC. Always believe "The only good is knowledge and the only evil is ignorance - Socrates"
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