Primary market

The primary market is the environment in which securities are initially offered to the public. It serves as a means for companies to obtain short- or long-term capital. By issuing securities, a company can finance large investment outlays that are apportioned in small amounts. When a company decides to take that route, it enters the money or capital market as an issuer.

Private and public entities can issue various types of securities: shares, bonds, debentures, Pfandbriefe, warrants, etc.

In an initial step, the securities are placed directly with investors or “taken down” indirectly by investment banks without the intermediation of a securities exchange. In Switzerland, this is mainly accomplished via of a “firm deal” underwriting by a bank or consortium of banks. After examining the books of the issuer, the bank/consortium takes down the entire issue of bonds or shares at a predetermined price. Thus the underwriting syndicate assumes the entire placement risk and the issuer can gain access to the proceeds of the issue.

If the company wishes to have the securities traded on an exchange (i.e. the secondary market), the bank(s) see to the continuation of the issuance process, which among other things involves the obligation to draw up a prospectus, determine the subscription period, as well as submit the listing application to the exchange. When a joint-stock company “goes public” by means of an initial public offering (IPO) of its shares, the proceeds constitute or increase the equity capital of the company. If bonds are issued, the company’s debt capital is established or increased.

See alsoSecondary market