A secondary market offering, according to the U.S.
Financial Industry Regulatory Authority
The Financial Industry Regulatory Authority (FINRA) is a private American corporation that acts as a self-regulatory organization (SRO) that regulates member brokerage firms and exchange markets. FINRA is the successor to the National Associati ...
(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 by large investors or institutions, and proceeds of the sale go to those holders, not the issuing company. It is also called a secondary distribution.
A secondary offering is not dilutive to existing shareholders since no new shares are created. The proceeds from the sale of the securities do not benefit the issuing company in any way. The offered shares are privately held by shareholders of the issuing company, who may be directors or other insiders (such as
venture capitalists
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to start-up company, startups, early-stage, and emerging companies that have been deemed to have high growth poten ...
) who may be looking to diversify their holdings. Usually, however, the increase in available shares allows more institutions to take non-trivial positions in the issuing company which may benefit the trading liquidity of the issuing company's shares.
A secondary market offering should not be confused with a
follow-on offering
A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company's initial public offering (IPO).
A follow-on offering can be categorised as dilutive or non-dilutiv ...
, otherwise known as a subsequent offering, or a dilutive secondary offering. In a follow-on offering, the company itself places new shares onto the market, thus diluting the existing shares.
"Secondary market offering" can be understood as an offering on the
secondary market
The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the s ...
, and is thus different from a secondary offering on 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 ...
— in other words, an offering following an initial, primary-market offering. A follow-on offering which is the second offering from a company can be understood as a secondary ''offering'' on a primary ''market'', which is where the confusion between a dilutive (follow-on) and a non-dilutive secondary market offering possibly comes from. If a company were to make a third, primary-market offering, this would be a follow-on offering which is not a ''secondary market'' offering. "Secondary offering" as described in this article is an offering on the secondary market which is non-dilutive, and is thus not a follow-on offering.
See also
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Public offering
A public offering is the offering of securities of a company or a similar corporation to the public. Generally, the securities are to be listed on a stock exchange. In most jurisdictions, a public offering requires the issuing company to publish a ...
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Corporate finance
Corporate finance is the area of finance that deals with the sources of funding, the capital structure of corporations, the actions that managers take to increase the Value investing, value of the firm to the shareholders, and the tools and anal ...
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Follow-on offering
A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company's initial public offering (IPO).
A follow-on offering can be categorised as dilutive or non-dilutiv ...
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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 ...
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Secondary market
The secondary market, also called the aftermarket and follow on public offering, is the financial market in which previously issued financial instruments such as stock, bonds, options, and futures are bought and sold. The initial sale of the s ...
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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) ...
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At-the-market offering
An at-the-market (ATM) offering is a type of follow-on offering of stock utilized by publicly traded companies in order to raise capital over time. In an ATM offering, exchange-listed companies incrementally sell newly issued shares or shares th ...
Notes
{{Corporate finance and investment banking
Stock market
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