Secondary (Follow-On) Offering
A later offering of shares after the IPO.
What is Secondary (Follow-On) Offering?
If the company sells new shares, it raises capital and dilutes existing holders. If existing holders such as founders or venture funds sell their shares, the company receives nothing and share count is unchanged - a secondary distribution.
Secondary (Follow-On) Offering: a worked example
Two years after its IPO, a company sells 5 million new shares to fund an acquisition - dilutive.
More terms in Equities, Funds & Alternatives
Shareholder Rights (Statutory vs. Cumulative Voting)
Voting, preemptive rights, dividends when declared, inspection, limited liability.
Types of Preferred Stock
Cumulative, convertible, callable, participating, and floating-rate preferred.
American Depositary Receipt (ADR)
A dollar-denominated receipt for foreign shares, traded in the US.
Rights vs. Warrants
Rights: short-term, below market. Warrants: long-term, above market.
Restricted & Control Stock (Rule 144)
Unregistered or insider-held stock with resale limits.
Employee Stock Options (ISO vs. NSO)
Incentive options get capital gains treatment; nonqualified options create income at exercise.
Technical Analysis
Forecasting prices from charts, trends, and trading volume.
Fundamental Analysis
Valuing a company from its financial statements, management, and industry.