Final answer:
Investors selling shares to each other after an initial public offering occurs on what is called the secondary market. This type of trading does not involve the firm receiving new funds, but allows investors to buy and sell existing shares.
Step-by-step explanation:
When investors sell shares of a firm's stock to each other on an exchange or through an electronic network, this is called secondary market trading. A firm only receives funds from selling its own stock directly to the public in an event known as the Initial Public Offering (IPO).
The IPO is crucial as it allows the firm to gain capital to possibly repay early-stage investors, such as angel investors and venture capital firms, and to expand operations. Following the IPO, shares are traded among investors on stock exchanges, where financial buyers can resell stocks and bonds to one another.
This secondary market allows shareholders to buy and sell ownership in publicly traded companies without the companies themselves receiving any new funds from these transactions. It is in these marketplaces that public companies' shares are continuously transacted as investors adjust their investment portfolios.