Question

Why secondary markets are so important to raise capital?

Please use a new words.

Thank you,

Answer 1

Secondary market is place where stocks or bonds of a company are traded without involvement of such company, by different investors. Unlike primary market where stocks are traded by IPO or other means in which the value of stocks are already fixed by the company. However in the secondary market the values of stocks differ or fluctuate depending upon the demand and supply gap of such stocks or securities.

Secondary markets are very important in the view of growth of economy as a whole as well as the company. Due to higher monetary transactions the economy gets benefited. Where in other hand to a company trading of its shares in secondary market is beneficial in several ways, like if the company performs well it will result in increasing demand of its stocks in secondary market which gives better brand name which will help the company in raising debt capital as it has good reputation the chances of it getting huge loan without much restrictions are more. Also the company can benefit by further issuing its stocks at higher premium. Which means the higher and better performance in secondary market will help the company in raising its capital.