Secondary Offering
Secondary Offering is an issuance of new share of stocks for public sale by a company who already made its IPO. Funds raised through secondary offerings are used for either refinance or growth. By issuing new stocks to the public, company dilutes the ownership position of current shareholders, but increases its market capitalization and company value.
Secondary Offering also refers to a security selling by a large current shareholder when he sells the whole portfolio or just a portion of his share. This usually happens when founders of the business want to step out or loosen their position in the company after lock-up period is terminated. In this case, none of the acquired assets goes to the company's account, there is no dilution of the position of current shareholders and market capitalization stays the same. In order to secure constant price of the stocks, investor who is selling his portion of shares would sell it gradually.
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