What distinguishes secondary equity from primary equity?

Secondary equity is characterized by transactions that involve existing shares rather than new shares being issued. In this context, when shares are traded on the secondary market, they are being sold by existing shareholders—these can be institutional investors, individual investors, or any other holders of the equity. The companies themselves do not receive any proceeds from these transactions because the shares have already been issued.

In contrast, primary equity involves the issuance of new shares, where companies raise capital directly from investors—typically during an initial public offering (IPO) or follow-on offering. The funds raised in primary equity offerings go directly to the company, which differentiates it from secondary offerings where the trading of shares occurs between buyers and sellers in the market.

The other options do not accurately describe secondary equity. For instance, limiting it to venture capitalists mischaracterizes the broader nature of secondary equity, and the reference to debt securities does not pertain to equity at all. Additionally, claiming that it involves only new investments from institutions is inapplicable to secondary transactions, as the focus is on transferring ownership rather than raising new capital.