What is a secondary offering?

A secondary offering is a public offering of shares that have already been issued by a company and are being sold by existing shareholders, rather than by the company itself. This means that the proceeds of the sale go to the selling shareholders rather than the company.

Secondary offerings may be initiated by insiders such as company executives, founders, or major shareholders who want to sell some of their shares to raise funds or diversify their holdings. They may also be initiated by venture capitalists or private equity firms that want to cash in their investments or reduce their exposure to a particular company.

Secondary offerings can have a dilutive effect on existing shareholders because additional shares are being issued, which can reduce the proportional ownership percentage of existing shareholders. However, if the offering is successful and reflects positively on the company's growth potential, it can also help to increase shareholder value in the long run.

Companies typically announce a secondary offering through a prospectus offering details about the offering. The offering price may be set either by negotiation between the company and the underwriters, or through a public auction process. In either case, the offering price is determined on the basis of market demand and supply, and may fluctuate during the offering period.