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S&P 500   5,026.61
DOW   38,671.69
QQQ   437.05
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Recession risks are fading, business economists say, but political tensions pose threat to economy
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S&P 500   5,026.61
DOW   38,671.69
QQQ   437.05
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Mardi Gras beads are creating a plastic disaster in New Orleans. Are there green alternatives?
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Venezuela defends military buildup, accusing neighboring Guyana of granting illegal oil contracts
Stock market today: World shares mostly higher after S&P 500 tops 5,000
Laser breakthrough could send stock soaring 2,467% (Ad)
Recession risks are fading, business economists say, but political tensions pose threat to economy
Biden's campaign joins TikTok, even as administration warns of national security concerns with app
S&P 500   5,026.61
DOW   38,671.69
QQQ   437.05
Israel's finance minister blasts Moody's downgrade of the the country's credit rating
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Mardi Gras beads are creating a plastic disaster in New Orleans. Are there green alternatives?
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Venezuela defends military buildup, accusing neighboring Guyana of granting illegal oil contracts
Stock market today: World shares mostly higher after S&P 500 tops 5,000
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Secondary Public Offerings

secondary public offering (SPO) is the sale of new or closely-held shares by a publicly-traded company that has already had an initial public offering (IPO). Non-dilutive secondary offerings occur when a major shareholder of a company sells a large portion or all of their holdings. In this scenario, the proceeds from this sale are paid to the shareholder that divests from the company. A dilutive secondary offering involves the creation of new shares and offering them to the public for sale. In this scenario, the proceeds from the sale are given to the company for future growth and expansion.What every investor needs to understand about secondary public offerings.

CompanyDate PricedDollar Value Shares Offered# of SharesPrice Per ShareIndicator(s)
CRBP
Corbus Pharmaceuticals
2/1/2024$82,175,000.004,325,000$19.00
SINT
Sintx Technologies
2/1/2024$4,000,000.0016,000,000$0.25Upcoming Earnings
Gap Down
EVAX
Evaxion Biotech A/S
2/5/2024$3,030,000.00757,500$4.00Gap Up
CING
Cingulate
2/5/2024$2,750,000.001,375,000$2.00
BFRG
Bullfrog AI
2/2/2024$3,888,524.001,028,710$3.78Upcoming Earnings
GRI
GRI Bio
2/2/2024$363,495.00330,450$1.10
NVVE
Nuvve
2/2/2024$6,070,000.003,035,000$2.00Gap Up
REVB
Revelation Biosciences
2/2/2024$581,969.00128,470$4.53Positive News
REKR
Rekor Systems
2/8/2024$25,000,000.0010,000,000$2.50
IMMX
Immix Biopharma
2/7/2024$14,999,999.005,535,055$2.71
JSPR
Jasper Therapeutics
2/7/2024$50,505,000.003,900,000$12.95Insider Buying
Positive News
PEGY
Pineapple Energy
2/7/2024$1,000,000.002,702,703$0.37Gap Down
High Trading Volume
PEPG
PepGen
2/7/2024$80,119,200.007,530,000$10.64Gap Down
PRSO
Peraso
2/7/2024$1,008,000.00480,000$2.10Gap Down

Filings

CompanyDate FiledOffer AmountIndicator(s)
VTS
Vitesse Energy
2/1/2024$300,000,000.00News Coverage
Positive News
SBFM
Sunshine Biopharma
2/1/2024$11,500,000.00Positive News
Gap Up
LIPO
Lipella Pharmaceuticals
2/1/2024$50,000,000.00Gap Down
ANVS
Annovis Bio
2/1/2024$250,000,000.00Gap Up
ISPR
Ispire Technology
2/1/2024$25,000,000.00News Coverage
Positive News
Gap Up
High Trading Volume
OCTO
Eightco
2/5/2024$4,000,000.00Positive News
Gap Up
CISS
C3is
2/5/2024$8,050,000.00Upcoming Earnings
Gap Down
ONDS
Ondas
2/2/2024$175,000,000.00
RVPH
Reviva Pharmaceuticals
2/2/2024$200,000,000.00Positive News
GNLX
Genelux
2/2/2024$300,000,000.00Upcoming Earnings
CRIS
Curis
2/8/2024$300,000,000.00Earnings Report
Analyst Report
Gap Down
LUCY
Innovative Eyewear
2/7/2024$50,000,000.00Upcoming Earnings
Positive News
AEYE
AudioEye
2/7/2024$150,000,000.00Positive News
Gap Up

Withdrawn

CompanyDate FiledOffer Amount# of SharesIndicator(s)
CUBT
Curative Biotechnology
2/1/2024$9,199,992.001,333,333
GE
General Electric
2/2/2024$20,000,000,000.000
What is a secondary public offering? Image of secondary offering with ticker symbols

Key Points

  • A secondary offering occurs when a company introduces additional shares of stock to the market.
  • It usually comes at a reduced price when compared to the current market rate. 
  • A secondary offering may be dilutive or non-dilutive depending on the source of the shares being offered. 
  • 5 stocks we like better than CRISPR Therapeutics

Many investors jump at the opportunity to participate in an initial public offering (IPO), which is the official debut of a new stock on a major exchange. But did you know some companies may offer a secondary public offering to issue new shares? These opportunities can allow investors to invest in established companies, often at a price discount. 

A secondary stock offering opportunity may come with little notice, so be prepared with information beforehand. Read on to learn more about the public secondary offering and how you can take advantage of upcoming secondary offerings. 

Overview of Secondary Public Offerings

What is a secondary public offering? First, before discussing secondary offering stock opportunities, it's important to understand what an initial public offering (IPO) is and how it works. An IPO is the process through which a private company offers its shares to the public for the first time, allowing it to become a publicly traded company. The company issues new shares in an IPO to raise capital and expand its business. 

The IPO process is expensive for companies, as it involves hiring investment banks or underwriters to help determine the offering price, market the shares to potential investors and facilitate the sale. This means that only major companies with some level of brand recognition will be able to go public, helping ensure the safety of investors. 

Before the IPO, the company undergoes a rigorous regulatory and due diligence process to comply with securities laws and provide transparent financial information to investors. After the IPO is approved, shares are listed, and investors can buy shares for the first time. Note that all investors do not have the same access to shares in the IPO, and retail investors may have difficulty getting shares at the initial price offering. 

During a secondary public offering, a company that is already publicly traded issues additional shares to the public. Unlike an IPO, a secondary public offering involves the sale of new shares by the company or its major shareholders instead of offering shares for the first time. Secondary offerings also seem priced well compared to market prices, allowing investors to access more affordable pricing on companies with market records they can examine

Two Types of Secondary Public Offerings

Secondary public offerings can go into two categories: non-dilutive secondary offerings and dilutive secondary offerings. The difference between the two types of secondary offerings is whether a company will add new shares to the market or release them to the public through existing investors. 

Dilutive Secondary Offerings

Dilutive secondary offerings involve the underlying company creating new shares to issue, therefore "diluting" the share pool. At the end of a dilutive secondary offering, there will be more outstanding shares than before the offering. 

Dilutive secondary offerings can result in the dilution of existing shareholders' ownership stakes. The total number of outstanding shares increases when the company issues and sells additional shares. As a result, existing shareholders' percentage ownership in the company decreases unless they participate in the offering to maintain their proportional ownership. This dilution occurs because the company's ownership is spread across more shares, while the total market capitalization remains unchanged. 

This type of offering is similar to an IPO, and usually raises additional money for projects, advertising or other company projects. However, it can be bad for existing shareholders, as dilutive offerings typically lower the price per share of stock. 

Non-Dilutive Secondary Offerings

Non-dilutive secondary offerings involve the sale of shares by existing shareholders, such as company insiders, founders or early investors, to retail investors. In this type of offering, the company itself does not issue new shares or receive any proceeds from the sale. Instead, the selling shareholders benefit from the proceeds from selling their shares to the public.

Non-dilutive secondary offerings allow existing shareholders to monetize their investments or reduce their ownership stakes in the company. It also allows insiders and early investors to realize gains or raise capital for personal or business purposes. From the company's perspective, it does not directly benefit financially from non-dilutive secondary offerings. However, it can still benefit indirectly by increasing the company's public float and potentially broadening its shareholder base. This type of offering does not inherently result in a share price drop, as no new shares are added. 

How Secondary Public Offerings Work

Like IPOs, secondary public offerings involve a detailed regulation and SEC monitoring process. Secondary offerings start when a company decides to offer it, either to raise capital or to provide existing investors with the opportunity to cash out some of their shares. The company must comply with regulatory requirements, which usually involves filing a registration with the SEC. The registration statement contains detailed information about the company, its financials, risk factors and the proposed offering.

The company must then work with underwriters or investment banks to finance and finalize the change in shares offered. The underwriters play a crucial role in determining the offering price and structuring the transaction. They assess market conditions, company fundamentals and investor demand to arrive at an appropriate offering price. The offering price is often set at a discount to the prevailing market price to attract new investors. The company will then market the offering using a secondary public offering list or newsfeed. 

On the day of the offering, the company and the underwriters announce the pricing and the number of shares to be sold. The offering is typically conducted through a public exchange, where investors place orders to purchase the offered shares. The underwriters facilitate the sale of the shares and handle the settlement process, ensuring the shares are delivered to the investors in exchange for the purchase price.

Primary vs. Secondary Offering

Primary offerings (usually referred to as IPOs) and secondary offerings differ in the source of shares offered to the public. In a primary offering, the company itself is the source of the shares being offered. An IPO aims to raise capital for the company's growth, expansion or other strategic objectives. The shares offered in a primary offering are usually newly issued — the sale proceeds go directly to the company.

In a secondary offering, the source of the shares being offered is typically existing shareholders, such as the company's insiders, major investors or early investors. The purpose of a secondary offering can vary, ranging from raising capital for the company to fulfilling regulatory requirements. Unlike an IPO, the company itself may not directly benefit financially from a secondary offering, as the proceeds go to the selling shareholders if the offering is non-dilutive. 

Secondary Offering vs. Follow-on Offering

The terms "secondary offering" and "follow-on offering" are often used interchangeably. However, there may be a slight difference between the two that some investors may use. The term "follow-on offering" implies that the offering follows the company's IPO and will have less impact than the original offerings. 

Thus, select investors may use the term "follow-on" offering to refer to non-dilutive secondary offerings only. Non-dilutive offerings "follow" the initial IPO and allow retail investors to invest in locked shares. However, this distinction is not common, and most investors and investing news resources will use the two terms to refer to the same general secondary offering process.   

Example of Secondary Public Offering 

An example of a highly-publicized secondary offering occurred with electric vehicle powerhouse Tesla Inc. (NASDAQ: TSLA) in February 2020. The company announced that it would create the opportunity for a non-dilutive secondary offering, as CEO Elon Musk would be taking a portion of profits. The secondary offering was non-dilutive because the shares sold were solely from existing shareholders, who participated in the offering by selling a portion of their holdings. 

Tesla secondary offering overview on MarketBeat

Image: Investors who participated in Tesla's February 2020 secondary offering have seen the price of their shares more than double in value. 

Tesla's secondary offering raised additional capital to strengthen its balance sheet and support its expansion plans. The company aimed to utilize the proceeds to fund its upcoming projects, including constructing new manufacturing facilities and developing new vehicle models. 

Benefits of Secondary Public Offerings

New secondary public offering news and announcements can be exciting for investors, as they provide several benefits that can enhance their portfolio composition. 

  • Investment opportunities: A secondary offering allows investors to participate in the purchase of additional shares in a publicly traded company. Investors can evaluate the company's performance, growth prospects and financials based on available information before making an investment decision. This is impossible during an IPO, when a stock debuts on the market for the first time. 
  • Affordable diversification: Stocks undergoing a secondary public offering often have a discount price compared to the current market rate. This can allow investors to buy shares of established, well-known companies with a lower upfront capital balance. 
  • Improved liquidity: On the company's side, issuing a secondary offering may improve liquidity. The additional shares increase the trading volume and availability of shares in the market. This increased liquidity can benefit investors by facilitating easier buying and selling of shares, potentially resulting in narrower bid-ask spreads and improved market efficiency.

Risks of a Secondary Public Offering

While secondary public offerings can be attractive to new investors, they may negatively impact share price in both the short- and long-term. 

  • Dilution of ownership: In dilutive secondary offerings, the issuance of additional shares can dilute existing shareholders' ownership stakes. When a company issues and sells new shares, the total number of outstanding shares increases, reducing the percentage ownership of existing shareholders unless they participate in the offering, potentially reducing the value per share. 
  • Dilution of dividends: When more shares are introduced to the market but a company's revenue stays the same, it may not be able to sustain its dividend yield. This means that a secondary offering may precede dividend cuts
  • Market reaction and resulting volatility: Secondary offerings can trigger market reactions and price volatility. The announcement of a secondary offering may lead to a temporary decline in the stock price as investors react to the potential dilution and increased supply of shares. Additionally, the offering price may be set at a discount to the prevailing market price, which can put downward pressure on the stock. These factors can introduce short-term price volatility and uncertainty for existing shareholders.

How to Know a Secondary Public Offering is Coming

Knowing when a secondary offering is coming typically requires staying informed and monitoring the market. Companies planning a secondary offering usually make formal announcements or disclosures to inform the public. You can find these announcements in press releases, regulatory filings or official statements on the company's investor relations website. Monitoring company news and updates using a reliable source like MarketBeat's financial calendar can provide insights into their intentions to conduct a secondary offering. 

Investing in Secondary Public Offerings 

As an investor, you know the importance of staying dynamic in a changing market. Secondary public offerings may be announced a few days in advance, which is usually not the case with an IPO. Keeping up with a secondary public offering calendar and regularly checking it can help you stay informed about new opportunities. 

FAQs

The following are some answers to your last-minute questions about secondary stock offerings. 

What is a secondary public offering?

A secondary public offering is when a company that is already publicly traded issues and sells additional shares to the public. It allows existing shareholders, such as company insiders or major investors, to sell their shares and potentially raise capital. It may add new shares to the existing pool or free new shares, depending on the type of offering. 

Is a secondary offering good for a stock?

The impact of a secondary offering on a stock can vary depending on the type of offering. A secondary offering can introduce additional shares into the market, potentially diluting existing shareholders' ownership and earnings per share. However, it can also provide benefits such as increased liquidity and capital for the company or existing shareholders.

What is an example of a secondary offering?

A highly publicized secondary offering occurred with Tesla's stock in February 2020. The offering was non-dilutive because it did not introduce new shares to the market. Instead, the company raised capital by freeing shares from early investors and owners. 

Sarah Horvath

About Sarah Horvath

  • horvath.sarah17@gmail.com

Contributing Author

Retail, Healthcare, and Real Estate stocks

Experience

Sarah Horvath has been a contributing writer for MarketBeat since 2022.

Areas of Expertise

Retirement investing, long-term retail investing, personal finance

Education

Bachelor of Arts, Arcadia University

Past Experience

Vanguard, Nationwide, Benzinga and MarketWatch


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