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Financial Terms and Glossary

Primary shares

Primary Shares

Primary shares are new shares issued by a company during an initial public offering (IPO) or subsequent equity offering.These shares are sold directly to investors in the primary market, with the proceeds going to the company to fund expansion, pay down debt, or for other corporate purposes. Unlike secondary shares, which are existing shares sold by shareholders, primary shares represent new equity and often lead to an increase in the total number of shares outstanding.

Example

A company issues 10 million primary shares during its IPO to raise capital for expanding its production facilities, increasing the total number of shares available in the market.

Key points

• New shares issued by a company during an IPO or equity offering.

• Sold in the primary market to raise capital for corporate needs.

• Increase the total number of shares outstanding.

Quick Answers to Curious Questions

Why do companies issue primary shares?

Companies issue primary shares to raise capital for expansion, pay down debt, or fund new projects, helping them achieve strategic goals.

How do primary shares affect existing shareholders?

Issuing primary shares can dilute the ownership percentage of existing shareholders but can also increase the company’s market capitalization.

What happens to the proceeds from the sale of primary shares?

The proceeds go directly to the issuing company, providing funds for corporate activities and investments.

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