DEFINITION of 'Secondary Liquidity'

Secondary liquidity refers to the ability of IPO investors to sell shares in the secondary market, that is, to buyers on a public stock exchange. The primary market consists of those institutional investors who buy the issued shares directly from the underwriter and/or syndicate of brokerages.

BREAKING DOWN 'Secondary Liquidity'

When a company goes public, the underwriting investment bank and/or syndicate of securities dealers sell the initial shares to the primary market, mostly institutional investors. These investors may then want to sell those shares in the secondary market, where it is purchased by retail and institutional investors.

The secondary market typically refers to transactions that occur on a public exchange. Secondary transactions can occur privately as well when an equity investor sells its commitment to a private equity fund or an alternative investor. These equity holdings are much less liquid than those acquired via public exchanges and are typically intended to be held over the long term.

RELATED TERMS
  1. Impact Day

    Impact day is the date a company announces a dilutive secondary ...
  2. Spot Secondary

    A market for the sale of a security that does not require SEC ...
  3. Secondary Offering

    A secondary offering is sale of new or closely held shares of ...
  4. Core Liquidity Provider

    A core liquidity provider is an underwriter or a market maker ...
  5. Secondary Reserves

    Assets that are invested in safe, marketable, short-term securities ...
  6. Liquid Asset

    A liquid asset is an asset that can be converted into cash quickly ...
Related Articles
  1. Investing

    ETF Liquidity: Why It Matters

    Lower levels of liquidity in exchange-traded funds make it harder to trade them profitably.
  2. Investing

    Understanding Liquidity Risk

    Make sure that your trades are safe by learning how to measure the liquidity risk.
  3. Investing

    AMC Prices Secondary at $31.50, Shares Fall

    AMC Entertainment priced at secondary offering at 31.50
  4. Investing

    What is Reduced Bond Liquidity and Why Does it Matter Now?

    Reduced bond liquidity caused investor concern earlier in the year, but some signs point to a resurgence going forward.
  5. Financial Advisor

    Why Liquidity Matters in the Corporate Bond Market

    Professional analysis and constant monitoring of liquidity risk when investing in corporate bonds is highly important.
  6. Investing

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  7. Investing

    Party City Slides on Surprise Secondary Offering

    Shares of Party City Holdco (NYSE: PRTY) plunged 8% on Friday after the party goods retailer abruptly announced a secondary offering of 10 million shares. The offering will be made on behalf ...
  8. Insurance

    Is Insurance Underwriting Right For You?

    If you have excellent analytical skills and an eye for detail, this may be your calling.
RELATED FAQS
  1. Why do we need a secondary market?

    Find out why secondary markets play a crucial role in economic activity by promoting efficiency, safety, information and ... Read Answer >>
  2. What is liquidity management?

    Take a look at the different definitions of liquidity, and find out how investors and businesses attempt to reduce exposure ... Read Answer >>
  3. What is liquidity risk?

    Learn how to distinguish between the two broad types of financial liquidity risk: funding liquidity risk and market liquidity ... Read Answer >>
  4. How much liquidity is considered too much liquidity?

    Learn about the risks of holding too much cash or investing in assets that are too liquid, and discover how liquidity is ... Read Answer >>
Hot Definitions
  1. Leverage

    Leverage results from using borrowed capital as a source of funding when investing to expand the firm's asset base and generate ...
  2. Financial Risk

    Financial risk is the possibility that shareholders will lose money when investing in a company if its cash flow fails to ...
  3. Enterprise Value (EV)

    Enterprise Value (EV) is a measure of a company's total value, often used as a more comprehensive alternative to equity market ...
  4. Relative Strength Index - RSI

    Relative Strength Indicator (RSI) is a technical momentum indicator that compares the magnitude of recent gains to recent ...
  5. Dividend

    A dividend is a distribution of a portion of a company's earnings, decided by the board of directors, to a class of its shareholders.
  6. Inventory Turnover

    Inventory turnover is a ratio showing how many times a company has sold and replaces inventory over a period.
Trading Center