secondary offering
The sale of new or existing shares in a company that has already had its IPO, either to raise additional capital or to allow existing shareholders to exit.
Example
“Six months after its IPO, the company did a secondary offering to raise $500 million for expansion.”
Memory Tip
SECONDARY offering = selling more shares AFTER the IPO. Can dilute existing shareholders.
Why It Matters
Secondary offerings can affect existing shareholders by diluting their ownership stake if new shares are issued, which may impact earnings per share and stock value. Understanding secondary offerings helps investors make informed decisions about when to buy, hold, or sell shares during these corporate events.
Common Misconception
Many people mistakenly believe that all secondary offerings mean a company is in financial trouble and desperate for cash. In reality, secondary offerings are a normal and common way for established companies to fund growth, refinance debt, or allow early investors to take profits from their successful investments.
In Practice
If a company worth 10 billion dollars with 100 million shares outstanding conducts a secondary offering of 10 million new shares at 50 dollars per share, it raises 500 million dollars in capital. Existing shareholders would see their ownership percentage diluted by approximately 10 percent, and the earnings per share metric would need to be recalculated based on the new total share count.
Etymology
SECONDARY (second, following the initial) OFFERING (sale of shares). A share offering SECONDARY to the original IPO.
Common Misspellings
Track markets & get real-time stock data
Related Terms
More in markets
Other markets terms you should know
See Also
Need financial definitions?
Clear definitions for 2,500+ finance, insurance, and investing terms.