The primary securities market (IPO) is the market in which the issuer issues and sells securities of a new issue. These securities are sold by subscription or directly to primary buyers.
(IPO-Initial Public Offering) - initial public offering of securities for investors. Also, the market (IPO) indicates that the company has brought its securities to the stock exchange for the first time and offers them to a wide range of people.
It is in the primary securities market that the company increases its capital by selling shares and bonds. This capital helps to improve the financial position required for the production process.
New issued securities are called an initial offering or (issue) issue, and the company issuing these securities is called the issuer (issuer). Investor (investor) - the name of the person who buys these securities. A participant in the primary securities market can be either an investor or an issuer.
Methods of placement on the primary securities market
Initial placement is carried out in two forms - private and public.
Private placement-securities are sold to a certain number of individuals (this number consists of one or two institutional investors). The difference between a private placement is that the transaction is closed. There are no financial disclosure requirements.
Open placement - securities are placed and sold through intermediaries. These intermediaries can be both institutional brokers and exchanges.
When the issue of new securities of the company becomes too large for the investment bank, in this case it uses the services of other investment banks to organize an "issue syndicate" and unite to place this issue.
READ THE ARTICLE MORE +
The primary market for securities
example
The owner of the glass vase factory, in order to find capital, became a corporation and sold part of the shares on the stock exchange. Such an operation (an example of a transaction) in the primary market is called an IPO (initial public offering) and means the first public entry into the stock market (the manufacturer becomes the issuer). In the primary market, securities are sold to their first owners - investors. The first placement cannot be public.
The company's securities can be sold to a certain group of persons without public disclosure of financial information. But in any case, all subsequent transactions with the placed securities will be carried out on the secondary market.
Securities can be purchased by both institutional and individual investors. The relationship between them is determined by the state of the credit system, the level of savings, the level of economic development. In the securities market of developed countries, the dominant positions are mainly occupied by institutional investors, including: pension funds, mutual funds, investment funds, insurance companies, commercial banks, etc.
So, the primary securities market is a place where the issuer constructs a new issue of securities to place them among investors. A joint-stock company may place its securities through closed and open subscriptions. The Company has the right to independently determine the method of placement of shares: in the charter or by decision of the general Meeting - by open (JSC "Open Joint Stock Company") or closed (CJSC "Closed Joint Stock Company") subscription.
Reasons
One of the reasons for issuing new shares may be a takeover (merger, merger) of companies. Acquiring companies use a form of exchange of shares of acquired companies for their shares. Such companies take an active part in the primary market as they issue new shares.
The second reason for entering the securities market may be the ability to share the borrowed capital that is in the total capital of the company. In some countries, the ratio between debt and equity is established by law. But, despite the existence of the law, in each country there is a clear idea of the permissible amounts of borrowed funds. Exceeding these limits can lead to risks for the company and its shareholders. In such a situation, the company, issuing new shares (replacing debt obligations with them), can adjust the structure of its capital. In developed countries, at the stage of development of such a market, the issue of new shares is very small, and also not always associated with free cash to finance the economy. All this leads to the fact that the scale of the primary market in developed countries is reduced, and its role as a regulator of investment in the economy as a whole is reduced.
The Russian securities market is at the stage of its development. The conditions of corporatization of enterprises lead to the creation of new joint-stock structures that are in urgent need of investment. The primary securities market will be the main segment for these purposes.
No matter in what form of placement of securities-through an intermediary or through terrible
Primary securities market and its advantages
Of course, first of all, the primary market mobilizes temporarily free capital and invests it in the economy. But it is not only the engine of increasing the savings of the national economy, it is also engaged in the distribution of funds by sectors of the national economy and industry. In a market economy, the placement criterion is the income that securities bring. This suggests that free money flows into the economy, industries and enterprises, as a result of which they provide income maximization. From the point of view of market criteria, the primary market is a means of creating an effective and full - fledged structure of the national economy, and with its help, the proportionality of the economy is balanced with the profit that has developed at the moment. for individual industries and enterprises.
The primary securities market is actually a regulator of the market economy. This largely determines the size of a country's savings and investments.
Classification
The primary market for securities
IPO Indicators
The primary market for securities
IPO goal
The primary market for securities
Examples of the primary securities market
One of the examples of successful placement in RTS START on the primary market was the IPO of Armada in July 2007. 80% of the placement went through RTS START. And already in November, the shares from the Quotation list " I "began to enter the Quotation list "B", and the capitalization by the end of the year since the placement increased by more than 134%.
Rosneft Oil Company July 14, 2006-held an initial public offering of shares, as a result of which they began circulation on (MICEX and RTS), as well as on the London Stock Exchange. As part of the IPO, 1,411 million shares were placed for a total of $ 10.7 billion. It also includes 1.126 million shares owned by Rosneftegaz and 285 million shares of the new issue. In Russia, this placement is the largest IPO and the fifth largest in the history of the global stock market.
0 Comments