Primary Market

The primary market is where new securities are issued and sold directly by the issuing company to investors. It is the initial sale of stocks, bonds, or other financial instruments to raise capital.

Example #1

When a company decides to go public and offers its shares for the first time to investors through an initial public offering (IPO), it is operating in the primary market.

Misuse

An example of misuse in the primary market could occur if a company misleads investors about its financial health or future prospects during an IPO. This deception can artificially inflate the value of the securities, leading to investors losing money once the true information is revealed. It is crucial to protect against such misuse to maintain market integrity and safeguard investors' interests.

Benefits

One significant benefit of the primary market is that it allows companies to raise capital to fund their growth and expansion by selling securities directly to investors. This process enables businesses to access funding that they can use to develop new products, expand operations, or pay off debts.

Conclusion

Understanding the primary market is vital for investors looking to participate in the initial sale of securities issued by companies. By ensuring transparency and accurate information during these offerings, consumers and investors can make informed decisions that align with CAP's objectives of fairness and consumer empowerment.