The term secondary offerings involves existing shareholders of a company sell their stock or a portion of their stock in the secondary market. In this type of offering, the company is not involved and the purchase and sale of shares is directly between the buyer and the seller.
Types of secondary offerings
There are two types of second offerings in the market, namely, non-dilutive secondary offerings and dilutive secondary offerings. In the former case, the shareholding of the company is not diluted as there is no issue of new shares thereby increasing the number of outstanding shares. On the other hand, in the case of dilutive secondary offerings, the company may raise more capital through a follow-on public offer and thereby dilute the existing shareholding of the company by increasing the number of outstanding shares.