2024 Shareholder’s Practical Guide

The stock market enables private companies to raise financing from individual and institutional investors. It is also a place where supply and demand for financial securities are brought together.

Primary Market

When a company wishes to diversify its sources of financing, it may decide to raise funds on the stock market. It then decides to go public and issues shares for the first time on the stock market. Later, if it wishes to raise more funds on the stock market, it may launch a capital increase.

This type of financing is what’s known as the primary market, where investors who have confidence in a company’s ability to thrive finance it directly and receive shares in return. They then become shareholders in the company, or co-owners, and accept the associated risks and potential gains.

Secondary Market

Holders of shares, or shareholders, may sell their shares to other shareholders on the stock market. This matching of offer and demand for shares sets their stock market price at a given time and contributes to their continuous evolution. This is the “stock market price”, and it is said that the company is “listed on the stock market”.

This free exchange of shares constitutes the secondary market. It is only thanks to the secondary market that the primary market can exist: indeed, this ability to resell a share of ownership in the company created through the liquidity of shares is essential for guaranteeing initial investors (in the primary market) that they can resell their shares (on the secondary market) when they want to regain their investments.

The stock market therefore plays a key role within the economy, as:

• companies rely on it for a part of the capital required for their development;
• and shareholders directly finance this growth (primary market) and may later exchange their shares (secondary market), ensuring that this type of financing for companies can continue.