A public offering is the offering of

securities A security is a tradable financial asset. The term commonly refers to any form of financial instrument, but its legal definition varies by jurisdiction. In some countries and languages people commonly use the term "security" to refer to any for ...

of a

company A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...

or a similar

corporation A corporation is an organization—usually a group of people or a company—authorized by the state to act as a single entity (a legal entity recognized by private and public law "born out of statute"; a legal person in legal context) and r ...

to the public. Generally, the securities are to be listed on a

stock exchange A stock exchange, securities exchange, or bourse is an exchange where stockbrokers and traders can buy and sell securities, such as shares of stock, bonds and other financial instruments. Stock exchanges may also provide facilities for th ...

. In most jurisdictions, a public offering requires the issuing company to publish a prospectus detailing the terms and rights attached to the offered security, as well as information on the company itself and its finances. Many other

regulatory Regulation is the management of complex systems according to a set of rules and trends. In systems theory, these types of rules exist in various fields of biology and society, but the term has slightly different meanings according to context. For ...

requirements surround any public offering and they vary according to jurisdiction. The services of an

underwriter Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabilit ...

are often used to conduct a public offering.

Stock offering

Initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investment ...

(IPO) is one type of public offering. Not all public offerings are IPOs. An IPO occurs only when a company offers its shares (not other securities) for the first time for public ownership and trading, an act making it a

public company A public company is a company whose ownership is organized via shares of stock which are intended to be freely traded on a stock exchange or in over-the-counter markets. A public (publicly traded) company can be listed on a stock exchange (l ...

. However, public offerings are also made by already-listed companies. The company issues additional securities to the public, adding to those currently being traded. For example, a listed company with 8 million

shares outstanding Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are distinguished from treasury shares, which are shares held by the corporation itself, thus represent ...

can offer to the public another 2 million shares. This is a public offering but not an IPO. Once the transaction is complete, the company will have 10 million shares outstanding. Non-initial public offering of equity is also called

seasoned equity offering A seasoned equity offering or secondary equity offering (SEO) or capital increase is a new equity issued by an already publicly traded company. Seasoned offerings may involve shares sold by existing shareholders (non-dilutive), new shares (dilutive) ...

. A

shelf prospectus Shelf registration, shelf offering, or shelf prospectus is a type of public offering where certain issuers are allowed to offer and sell securities to the public without a separate prospectus for each act of offering and without the issue of furth ...

is often used by companies in exactly that situation. Instead of drafting one before each public offering, the company can file a single prospectus detailing the terms of many different securities it might offer in the next several years. Shortly before the offering (if any) actually takes place, the company informs the public of material changes in its finances and outlook since the publication of the shelf prospectus.

Other security types

Other types of securities, besides shares, can be offered publicly. Bonds, warrants,

capital note {{Unreferenced, date=June 2019, bot=noref (GreenC bot) Capital notes are several types of securities. "Capital note" has a number of meanings, as it can be either an equity security, a debt security or a form of security used in structured financ ...

s and many other kinds of

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

and

equity Equity may refer to: Finance, accounting and ownership * Equity (finance), ownership of assets that have liabilities attached to them ** Stock, equity based on original contributions of cash or other value to a business ** Home equity, the dif ...

vehicles are offered, issued and traded in public capital markets. A

private company A privately held company (or simply a private company) is a company whose shares and related rights or obligations are not offered for public subscription or publicly negotiated in the respective listed markets, but rather the company's stock is ...

, with no shares listed publicly, can still issue other securities to the public and have them traded on an exchange. A public company may also offer and list other securities alongside its shares.

Primary and secondary offering

Most public offerings are in the

primary market :''"Primary market" may also refer to a market in art valuation.'' The primary market is the part of the capital market that deals with the issuance and sale of securities to purchasers directly by the issuer, with the issuer being paid the proce ...

, that is, the issuing company itself is the offerer of securities to the public. The offered securities are then issued (allocated, allotted) to the new owners. If it is an offering of shares, this means that the company's

outstanding "Outstanding" is a song originally performed by the Gap Band and written by member Raymond Calhoun. The song originally appeared on the group's platinum-selling 1982 album '' Gap Band IV''. It is one of their signature songs and biggest hits, re ...

capital grows. If it is an offering of other securities, this entails the creation or expansion of a series (of bonds, warrants, etc.). However, more rarely, public offerings take place in the secondary market. This is called a

secondary market offering A secondary market offering, according to the U.S. Financial Industry Regulatory Authority (FINRA), is a registered offering of a large block of a security that has been previously issued to the public. The blocks being offered may have been held ...

: existing security holders offer to sell their stake to other, new owners, through the stock exchange. The offerer is different from the issuer (the company). A secondary market offering is still a public offering with much the same requirements, including a prospectus.

United States

In the United States, primary offerings are typically done via

Form S-1 Form S-1 is an SEC filing used by companies planning on going public to register their securities with the U.S. Securities and Exchange Commission (SEC) as the "registration statement by the Securities Act of 1933". The S-1 contains the basic ...

filings while secondary offerings often use

Form S-3 Form S-3 is the most simplified securities registration form used by the U.S. Securities and Exchange Commission. It may only be used by companies that have been required to report under the Securities Exchange Act of 1934 for a minimum of twelv ...

to issue through a shelf registration.

References

{{Financial markets navigation Corporate finance Financial markets Offering Initial public offering

Stock offering

Other security types

Primary and secondary offering

United States

See also

References