Chapter 2 of 620% of exam
Primary and Secondary Markets
How companies raise capital and how their shares then trade. This covers IPOs and the roles of the sponsor and prospectus, the mechanics of secondary trading and settlement, and corporate actions such as rights and bonus issues.
Raising and trading capital
In the primary market the issuer receives the proceeds, as in an IPO; the sponsor conducts due diligence and manages the listing, and the prospectus discloses the material information investors need. In the secondary market shares trade between investors and settle through CCASS on a T+2 basis. Companies raise further capital by rights issues (new shares offered pro rata, usually at a discount), while bonus issues and stock splits reissue existing value without raising new money.