New Issue Market, Primary Market, Investment Analysis and Portfolio Management, aktu mba, dwivedi

Summary

This video script delves into the intricacies of the primary market, also known as the new issue market, where securities are initially issued for the first time. It explains the market's function, importance, and the process of raising capital for both new and existing companies. The script outlines the primary market's role in financial recruitment, the difference between primary and secondary markets, and the significance of the initial public offering (IPO) process. It also touches on the investor's perspective, the distribution of new issues, and the market's importance for long-term investment returns.

Takeaways

• 🌟 The primary market, also known as the new issue market, is where securities are initially offered for the first time.
• 🏢 It is a platform for companies to raise capital by issuing new shares or securities for the first time, which is crucial for financial recruitment and expansion.
• 📈 The process involves several key functions including origination, propagation, underwriting, and distribution, each playing a vital role in the successful issuance of new securities.
• 🔍 Origination involves a thorough analysis and investigation of the issuing company's potential, feasibility, and financial stability to ensure the investment is secure for the public.
• 📢 Propagation is about informing the public and potential investors about the new issue through various channels like advertisements, press releases, and social media.
• 💼 Underwriting is a service provided by intermediaries, such as banks or financial institutions, who guarantee the sale of the securities and ensure the company receives the capital even if the public does not fully subscribe.
• 📦 Distribution is the final stage where the securities are actually sold to the public, completing the capital raising process for the company.
• 💵 The primary market is significant because it allows companies to raise funds directly and provides an opportunity for investors to invest in new ventures with potential for long-term returns.
• 🔒 It offers a safer investment environment compared to the secondary market as the prices of securities are not manipulated and are based on the company's analysis and valuation.
• 🌐 For existing companies, the primary market offers a chance to raise additional capital through follow-on public offers (FPO), and for new companies, it's a platform to establish their presence and raise seed capital.
• ♻️ The market is essential for the economy as it facilitates the flow of capital from investors to companies, which can then use these funds to grow, create jobs, and contribute to economic development.

Q & A

What is the primary market or new issue market?

The primary market, also known as the new issue market, is where securities are issued for the first time. It is the initial offering of stocks or bonds by a company to the public to raise capital.

How does the primary market function?

The primary market functions by allowing companies to issue new securities for the first time to raise capital. Investors can purchase these securities directly from the issuer, and the funds go directly to the company.

What is the difference between primary and secondary markets?

The primary market is where new securities are issued for the first time, while the secondary market is where existing securities are bought and sold among investors. The primary market involves the company issuing the securities, whereas the secondary market involves trading between investors.

Why is the primary market important for investors?

The primary market is important for investors because it provides them with the opportunity to purchase securities at the initial offering price. This can potentially offer better returns as investors can buy securities before they are traded on the secondary market.

What is the role of underwriting in the primary market?

Underwriting in the primary market is a process where intermediaries, such as investment banks, guarantee the issuance of securities by a company. They ensure that the securities are sold to investors by purchasing them from the issuer and then reselling them to the public.

What are the steps involved in the origination process in the primary market?

The origination process in the primary market involves analyzing the issuing company's financial viability, determining the size and structure of the issue, and deciding on the terms and conditions of the security issuance.

Why is the primary market crucial for companies raising capital?

The primary market is crucial for companies raising capital because it allows them to access funds directly from investors. This is often the first time a company offers its shares or bonds to the public, providing a significant source of capital for business expansion and growth.

How does the distribution process work in the primary market?

The distribution process in the primary market involves the sale of new securities to the public. This is typically done through a network of brokers and dealers who facilitate the sale of securities to investors.

What is the significance of the new issue market for the economy?

The new issue market is significant for the economy as it helps in the efficient allocation of capital. It allows companies to raise funds for growth and investment, which in turn can lead to job creation and economic development.

How does the primary market contribute to the financial growth of a company?

The primary market contributes to the financial growth of a company by providing a platform to raise capital through the issuance of new securities. This capital can be used for various purposes such as funding research and development, expanding operations, or paying off debt.

What are the risks associated with investing in the primary market?

Investing in the primary market comes with risks such as the potential for the value of the securities to decrease after issuance, the company's performance not meeting expectations, and the overall market conditions affecting the returns on investment.