Primary Market

A primary market issues new securities on an exchange for companies, governments and other groups to obtain financing through debt-based or equity-based securities. Primary markets are facilitated by underwriting groups consisting of investment banks that set a beginning price range for a given security and oversee its sale to investors. Once the initial sale is complete, further trading is conducted on the secondary market, where the bulk of exchange trading occurs each day.

Companies and government entities sell new issues of common and preferred stock, corporate bonds and government bonds, notes and bills on the primary market to fund business improvements or expand operations. Although an investment bank may set the securities' initial price and receive a fee for facilitating sales, most of the funding goes to the issuer. Investors typically pay less for securities on the primary market than on the secondary market.

Facebook Inc.'s initial public offering (IPO) in 2012 was the largest IPO of an online company and one of the largest IPOs in the technology sector. Many investors believed the stock's value would very quickly increase on the secondary market due to the company's popularity. Because of high demand in the primary market, underwriters priced the stock at $38 per share, at the top of the targeted range, and raised the stock offering level by 25% to 421 million shares. The stock valuation became $104 billion, the largest of any newly public company.

Although Facebook raised $16 billion through the primary market, the stock did not greatly increase in value the day of the IPO. After 460 million shares were sold and turnover exceeded 100%, the stock closed at $38.23. However, Facebook still raised funding and investors purchased stock at a discount through the primary market.

In June 2016, the Republic of Argentina announced it was selling $2.75 billion worth of debt in a two-part U.S. dollar bond sale. Funding was going toward liability management purposes. Joint underwriters included Morgan Stanley, Bank of America, Merrill Lynch, Deutsche Bank and Credit Suisse.

YPF, an Argentine oil company, announced it was offering peso-linked, U.S. dollar-denominated 2020 bonds worth $750 million. The senior unsecured notes were being marketed with no registration rights, listed in Luxembourg and governed by New York law.

Costera, a Colombian road concessionaire, announced a dual-currency bond sale. Funding would cover construction expenses and related costs for the Concesion Cartegena Barranquilla Project. The bonds were listed in Luxembourg and governed by New York law. The main underwriter was Goldman Sachs and co-manager was Scotiabank.