If Apple Computer decided to issue additional common stock, and Varga purchased 100 shares of this...
If Apple Computer decided to issue additional common stock, and Varga purchased 100 shares of this stock from Smyth Barry, the underwriter, would this transaction be a primary or a secondary market transaction? Would it make a difference if Varga purchased previously outstanding Apple stock in the dealer market? Explain.
Homework Answers
In the first scenario, where Apple Computer issues additional common stock, Smyth Barry acts as an investment banker to the issue, and Varga's transaction would be a primary market transaction. This transaction impacts the balance sheet and statement of cash flows of Apple Computers.
In the second situation, Apple has already issued stock which are currently outstanding in the secondary market. Varga purchases 100 of these shares, and therefore it is a secondary market transaction. This transaction does not have any impact on the financial statements of Apple Computers.
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If Apple Computer decided to issue additional common stock, and
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