The primary market is where companies and governments raise fresh capital by selling new securities. An IPO is a classic primary market event: buyers pay the issuer, not another investor. After that first sale, trading usually moves to the secondary market where investors buy from each other.
Key takeaways
- In the primary market, money goes to the issuer.
- IPOs, rights issues and new bond offerings are primary market deals.
- A prospectus explains the offer terms and risks before you subscribe.
- Getting an allocation at issue does not mean the price will rise afterwards.
Why it matters in Ethiopia
As more Ethiopian companies list and raise capital, most first-time investors will meet the primary market through IPOs and follow-on offers. Understanding that you are funding the company, not buying from a previous holder, frames the decision properly.