Primary & Secondary Markets — Q&A

Negotiable securities trade between investors in the secondary market (e.g., common stock). Redeemable securities are bought/sold directly with the issuer (e.g., mutual funds, UITs). Common stock is negotiable, not redeemable.

T+1 (trade date plus one business day). ⚠️ Do not count weekends or holidays — settlement uses business days only.

The primary market. An IPO is the first time an issuer sells shares to the general public. Proceeds go to the issuer — an issuer transaction.

The secondary market (non-issuer transaction). The selling investor receives proceeds; Home Depot (the issuer) does not.

Secondary market = investors trade with each other after initial sale. Follow-on/APO = issuer sells new shares in the primary market; issuer gets proceeds. Secondary offering = large shareholders (often insiders) sell shares they already own; proceeds go to selling shareholders and the issuer may not be involved.

To raise capital (money) for growth — new offices, equipment, hiring, etc. Issuing stock means giving up some control to stockholders.

They lock in their gain or loss and no longer participate in the issuer’s future successes or failures.

IPO and follow-on = primary market, issuer receives proceeds. Zuckerberg’s sale = secondary offering, selling shareholder (insider) receives proceeds.