What is a secondary offering?

A secondary offering refers primarily to the resale of existing securities by individual owners rather than the issuance of new shares by the company itself. This is an important concept in capital markets as it provides liquidity to shareholders who wish to sell their stake in the company without the company raising new capital.

During a secondary offering, the shares sold in the market are typically those that were originally issued in an initial public offering (IPO) or previous offerings and are being sold by existing shareholders, which can include company insiders or institutional investors. This transaction doesn't directly affect the total number of shares outstanding since it merely transfers ownership of existing shares rather than creating new ones.

In contrast, the issuance of new shares would indicate a primary offering, wherein the company directly raises funds by offering new stock to investors. Understanding the distinction between primary and secondary offerings is crucial for comprehending market dynamics and the implications for both the issuing company and investors.