The primary market, an alternative way to invest
The primary market is the market in which newly created securities are sold and therefore they are offered to investors for the first time. When a company has financing needs, it can raise funds by issuing new shares and selling them.
On the other hand, the secondary market is a trading market of securities previously issued in the primary market. The best example of a secondary market is the stock exchange, in which the same shares can be exchanged an indeterminate number of times.
Although the primary market generally involves the issue of new securities, offerings of existing shares are also included in this category. In this case, instead of creating new shares, one or several shareholders of the company make their shares available to the general public.
One of the main differences between the primary market and secondary market is the number and volume of transactions, since in the primary market equities are exchanged only once between the issuer and their first buyer. If the buyer decides then to sell them, those equities will be traded on the secondary market.
In Spain, the primary market is regulated by organizations such as the National Securities Market Commission (CNMV) and the Department of the Treasury and Financial Policy, which ensure that issues comply with certain requirements that guarantee their solvency and liquidity. Companies that participate in this market must share financial and strategic information that allows investors to assess the offering. Thus authorities verify that those financial assets will subsequently have an adequate performance in the secondary market.