Describe an initial public offering (IPO). What are the differences between a primary offering and a secondary offering?

Describe an initial public offering (IPO). What are the differences between a primary offering and a secondary offering?

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July 10, 2021
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Describe an initial public offering (IPO). What are the differences between a primary offering and a secondary offering?

Answer and ExplanationSolution by a verified expert

Explanation
Initial public offering (IPO) is the process whereby a venture offers its stocks to the public for the first time. The shares before being offered to the public are registered with the Securities and Exchange Commission. After the IPO, the company's shares are traded in the open market.

The main point of difference between a primary offering and a secondary offering is with regards to the types of shares sold. In a primary offering, investors purchase new shares or stocks directly from the issuer or its first owners. Whereas,in a secondary offering, investors purchase used shares or stocks from the sources other than the issuer such as employees, or other investors and so on.

Verified Answer
Initial public offering (IPO) refers to the first public sale of the stocks of a particular venture.

In the primary offering, new shares are offered for sale, whereas secondary offering refers to the sale of shares which are already traded in the market.

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