What is Secondary Public Offering?

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Subsequent public offering refers to the issuance of already listed shares by a listed company on the existing stock exchange market without increasing new shares. Subsequent public offering can be conducted to raise funds to support the company's expansion plans, debt repayment, or other purposes. In a subsequent public offering, existing shareholders can choose to purchase newly issued shares to maintain their proportion of equity in the company. The public can also become shareholders of the company by purchasing these newly issued shares. Subsequent public offerings usually need to comply with the listing regulations of the stock exchange and obtain approval from regulatory authorities.

Definition

A secondary public offering refers to a process where a company that is already publicly listed issues additional shares to existing shareholders and the public without increasing the total number of shares. This is typically done to raise funds for expansion plans, debt repayment, or other purposes.

Origin

The concept of secondary public offerings emerged with the development of capital markets, particularly in the late 20th century, as companies sought more funds to support their growth and expansion plans. It became a crucial method for companies to raise capital without diluting existing shareholders' equity.

Categories and Features

Secondary public offerings can be categorized into two main types: non-dilutive and dilutive offerings. Non-dilutive offerings do not increase the company's total share capital, while dilutive offerings do. The advantage of non-dilutive offerings is that they do not affect the existing shareholders' ownership percentage, whereas dilutive offerings may change shareholders' ownership proportions. Key features of secondary public offerings include the need to comply with stock exchange listing rules and regulatory approvals.

Case Studies

A typical example is Apple's secondary public offering in 2013, which raised $17 billion for stock buybacks and dividend payments. Another example is Tesla's 2020 secondary public offering, which raised $5 billion to support its production expansion and new technology development.

Common Issues

Investors might face issues such as concerns about the company's future profitability and the risk of stock price volatility following the offering. A common misconception is that all secondary public offerings lead to shareholder equity dilution, which actually depends on the specific type of offering.

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