Subdivisions of the Stock Market
There are two major subdivisions to the stock market: the primary market and the secondary market. The primary market involves only new issues, while the secondary market handles "used" issues. When the company sell the shares, the shares are said to be offered in a primary offering. After their initial sale, the shares trade among investors in the secondary market. After the initial sale, the company receives no proceeds from any sales of the same shares.
For example, investor A buys the shares from the company for $10 each in the primary offering. Two years later he sells the same shares to investor B for $15 each, making a profit of $5 per share. Later investor B sells the shares to investor C for $7 each, taking an $8 per share loss. The issuing company neither gains or loses from the sales to investors B or C.
The sole determinant of the market value of the shares in the secondary market is the price that potential buyers are willing to pay and that prospective sellers are willing to accept.
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