Markets

Question 1

Primary market:

Answer 1

• Initial public offer/primary offer
  • The first sale of stock by a company to the public
• Follow-on/secondary offer
  • Dilutive vs non-dilutive

Question 2

Secondary market

Answer 2

• Existing securities are traded between investors
• Stock exchanges provide a central market place
  • Enhances liquidity

Question 3

Regulation of markets

Answer 3

• In both primary and secondary markets issuers are regulated, primarily in respect of governance and transparency
• Firms that assist in issuing securities and firms that trade securities are also regulated

Question 4

Dilutive vs non-dilutive

Answer 4

Non-dilutive – where shares are brought to the market from the issued share capital but not part of the free float. E.g. directors selling their own shares to investors.
Dilutive – where a company’s board of directors agrees to increase the share float for the purpose of selling more equity in the company.