What is a secondary offer?
After the company issues sharing sharing in publicly traded markets, it can find that for some business reason it needs to raise additional capital or money. One way to achieve this is to launch a secondary offer in which it is available for investors, retail and institutional, more shares or shares to buy and sell in public markets. There are advantages and disadvantages.
A company that has already issued shares in the debut initial public offer (IPO) is eligible to sell other shares in the secondary offer. The issuing corporation, usually the CFO, will cooperate with the investment bank to determine the appropriate number of shares for sale and also the market price for which each individual share of shares sells. By the way, this investment bank could get certain authorities to purchase shares in a secondary offer at a discount price.
In the United States, the number of shares that can be sold in such a pre -determined basis on the basis of a prospectus thatAt the time of IPO, the company submits with the regulatory body in the region. However, these types of shares sale must be approved by the Board of Directors. The company usually makes a notice of details of the sale components, such as sold, how many shares will be sold and how long.
There could be a number of reasons to control the company team to issue shares in a secondary offer. For example, the company may have an acquisition in its monuments, but capital is not enough to buy a company that it wants to integrate into its own entity. One way to raise the necessary funds is to start the secondary offer.
Maybe the company wants to reduce its debt load and cannot generate enough income or sales. A secondary offer can be a suitable solution. Or, if a company like Phamaraceutical Operation needs additional capital for monitoring clinical evaluation for new development of drugs, chapItalians or expensive process, then can help issuing securities on the financial markets.
The primary disadvantage for the secondary offer is associated with existing shareholders. Investors who buy shares become part of this company and the company's own share depending on how many shares they buy. However, this percentage of ownership is diluted when there is a secondary offer because the size of the total fund from which the stock is available. Shareholders are often granted rights, such as the ability to vote on the main business actions depending on the size of the investment, so these privileges can be similarly diluted when the number of total securities increases.