- CFA Exams
- 2023 Level I
- Topic 5. Equity Investments
- Learning Module 36. Market Organization and Structure
- Subject 6. Primary Security Markets
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Subject 6. Primary Security Markets PDF Download
The primary markets are those in which new issues of bonds, preferred stock, or common stock are sold by government units, municipalities, or companies to acquire new capital.
- New issue.
- Key factor: issuer receives the proceeds from the sale.
There are two important rules in the primary capital markets:
New stock issues are divided into two groups:
A rights issue is an option that a company can opt for to raise capital under a secondary market offering or by using a seasoned equity offering of shares to raise money. It is a special form of shelf offering or shelf registration. With the issued rights, existing shareholders have the privilege of buying a specified number of new shares from the firm at a specified price within a specified time.
Government bond issues are sold at Federal Reserve auctions.
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