​Primary Market

When a company issues shares and sell them to non-founders, the company is turned from a private to a public one through a process called “Initial Public Offering”. Companies usually tend to propose initial public offering for several reasons. The most important is to ensure a source of funding for the company’s future growth or to provide liquidity for the original shareholders.

During the Initial Public Offering process, the issuing company or the owners of the company get the return from selling the company's shares. After the completion of the IPO's process, the company does not get any return from  trading its shares.

Before the IPO, the company works with an underwriter whois usually an investment bank that approves to buy all the shares at a specific price and then sells them. Usually the underwriter works with a financial consultant to specify the offering price and the number of shares to be offered to the public at that price. That is done after evaluating the company’s future and its assets and liabilities.

Book building is one of the newly applied approaches in CMA. It is considered one of the most applied approaches to determine at what price to offer an IPO in international financial markets. It also encourages the institutional investor to buy which would increase the market’s stability and efficiency. Book building is the process by which the financial consultant invites investors from the companies to put their bids within the price range and depending on the demand and the offered prices, the final price is decided.

Secondary Market

Shares and debt instrument are bought and sold through the secondary market. That is based on several elements such as: profitability of the issuing company in regard to the shares whereas the interest levels are for the debt instruments.  Investing the savings in stocks is one of the most common ways where the investor gets a chance to have good returns. On the other hand, this kind of investment requires knowledge and understanding of the financial market mechanisms and its investment strategies in addition to several related elements.

Shares: consist of investments that give its owner ownership in a specific company which qualifies him/her to be a participant in its financial success or failure. An investor chooses to invest in the stocks of a company in which he/she predicts a future price increase  or distributing dividends on its shareholders.  Shares that are expected to increase in value with time are called “Growth Stocks” whereas “Dividend Stocks” are the ones that pay regular profits to its shareholders.

The prices of shares usually increase and decrease depending on the market supply and demand which could decrease their value in the short term. The repetitive change in share prices and its speed define the volatility of the share itself. Although investing in shares might expose its owner to higher risks of losing his/her capital or a apart of it if compared to other investing areas, but at the same time it provides good opportunities for attractive returns on investments.

When an investor owns a share in a company, he/ she have the right to say his/her opinion in its work that commensurate with the size of his/her ownership in the company. Each shareholder has the right to vote on the major decisions related to the company’s general policies. Good examples of these decisions are offering additional shares in the market or merge the company with another. Usually companies convene annual meetings (general assembly) where the shareholders can discuss and vote on the company’s future. 

Companies sometimes issue different types of shares with different titles and might list it in several markets. Some issued shares are recorded with partial ownership at one of the company’s branches or ownership in a subsidiary. Furthermore, dividends’ policies may be imposed on those issued shares or limit the voting right or even limit selling at specific prices.

Some of the shares’ titles

Shares that pay regular profits to its shareholders are called “Dividend Stocks”. On the other hand, the shares that pays very little profits or do not pay profits ever but reinvests its accumulated profits are called “Growth Stocks”. One of the characteristics of investing in shares that it allows the investor to choose the type of shares to invest in that commensurate with his/her investment goals and strategy.