Definition
A secondary offering is the sale of securities after a company's IPO. In a dilutive secondary offering, the company issues new shares, raising capital but diluting existing shareholders. In a non-dilutive secondary, existing shareholders (insiders, early investors) sell their shares - the company receives no proceeds. Secondary offerings often cause stock price declines due to increased supply or signal that insiders want to exit. Shelf registrations allow companies to issue secondaries quickly when conditions are favorable.
Example
A company with 50 million shares issues 10 million new shares at $40 in a secondary offering. Existing shareholders now own 83.3% of a larger company. If proceeds are invested productively, the dilution may be worthwhile.
FAQ
What is Secondary Offering?
The sale of new or existing shares after a company's initial public offering.
Why is Secondary Offering important?
Secondary Offering helps investors evaluate IPO and make more informed decisions.