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What are Secondary Issues?

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  • Written By: Mary McMahon
  • Edited By: O. Wallace
  • Last Modified Date: 02 November 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Secondary issues are stocks which are sold after they have been issued. These stocks are sold on what is known as the secondary market, a public stock market which is open to many types of investors. Trading of stocks after their initial public offering is an important part of the stock market. By being able to resell previously issued stocks, investors can realize a profit from the stocks they hold. People may pay cash for a secondary issue, or may arrange to make a trade for another stock or security.

The values of secondary issues can wax and wane in response to movements of the market as well as the fortunes of the individual company. These issues are for shares in companies which are already listed on the stock market, in contrast with primary issues, which are shared in companies which have never been traded before. Primary issues are sold to investors during an initial public offering to raise capital so that the firm can invest in development and other activities.

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Sometimes, large scale investors will sell off what are known as seasoned stocks in blocks. Seasoned stocks are stocks in companies which have been traded on the market for at least six months and have a proven track record in terms of performance. When companies sell stocks in blocks, they often do so with the assistance of an adviser who can handle the details of the sale to ensure that the most profit is realized. Selling in blocks can potentially destabilize the market, so it must be done carefully. The subsequent sale blocks are secondary issues because they are not being issued by the company itself, but rather by an investor.

People can buy secondary issues in large blocks if they have access to the capital to do so, or they may make arrangements to purchase smaller groups of shares or even single shares. The timing of purchases can be critical because values can rise and fall over the course of a day and people must be able to make a purchase at the most optimal price. Buying secondary issues at the wrong time can result in a loss as a result of a fall in value.

Once a company has made an initial public offering with a number of primary shares, it can also decide to make additional offerings in the future to raise more capital. Many companies keep shares in reserve, in part to avoid flooding the market and to avoid situations in which people gain a controlling share and are thus able to take over. In these cases, existing stock holders may be offered a preference, depending on the type of stock they are holding.

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