What does 'secondary equity' refer to?

'Secondary equity' refers to the securities that are sold by existing shareholders, typically after the initial public offering (IPO) has taken place. This form of equity is not newly issued; rather, it involves transactions where existing shares are sold in the market.

When existing shareholders, such as early investors or employees, decide to sell their shares, this is considered secondary equity. This differs from primary equity, which involves new shares being issued by the company to raise fresh capital. In essence, secondary equity allows investors to buy and sell shares that are already in circulation, reflecting the ongoing nature of capital markets and providing liquidity to shareholders.

This definition clarifies why the choice referencing equity raised from common investors, such as shareholders, aligns with the concept of secondary equity, as it encompasses shares already owned and being traded in the market. Other options focus on various other aspects of equity that do not align with the established notion of secondary equity.