In the context of finance and securities, a non-issuer transaction refers to a transaction that involves securities but does not directly involve the issuing company. The transaction is instead initiated by private individuals or entities who are trading the securities among themselves.
This can include transactions such as buying or selling stocks, bonds, or other securities on secondary markets, like stock exchanges, where the issuer of the securities is not involved in the transaction.
In these cases, the issuer has no control over the terms of the transaction, and they do not receive any proceeds from it. The securities are simply changing hands from one investor to another. The transaction price is typically determined by market forces rather than by the issuer.
Example of a Non-Issuer Transaction
Let’s say you have some shares of Company A that you bought a year ago. Company A issued these shares initially (in an issuer transaction), possibly via an Initial Public Offering (IPO), at which time they directly sold and profited from the shares. You bought these shares from the market, not directly from the company, so even your original purchase was a non-issuer transaction.
Now, a year later, you decide you want to sell your shares. You find a buyer (another investor), and you sell your shares to them. This transaction does not involve Company A directly; they’re not the ones buying or selling the shares, and they don’t profit from this transaction. This sale of shares is a non-issuer transaction, because the issuer (Company A) is not directly involved. Instead, the shares are just changing hands from one investor (you) to another investor.
The price of the shares in this transaction isn’t set by Company A, but by the market – supply and demand for the shares on the stock exchange determine the selling price. This is a typical example of a non-issuer transaction.