Subsequent Offering

DEFINITION of 'Subsequent Offering'

An offering of additional shares after the issuing company has already had an initial public offering (IPO). In a subsequent offering, the new shares are usually issued from the company's treasury, and the net offering proceeds go the company. Since a subsequent offering increases the company's shares outstanding, it has a dilutive effect, i.e., it dilutes the stakes of existing shareholders.

BREAKING DOWN 'Subsequent Offering'

A company may seek to complete a subsequent offering for a number of reasons. Investment demand for its shares may be high even after the initial offering, or it may look to raise capital to capitalize on new opportunities. Another reason could be that the company is looking to bolster its cash reserves at an opportune time, because it foresees funding challenges ahead. This may especially be the case for development-stage technology and biotechnology companies, which often have huge capital requirements in the initial years.

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    The best way to answer this question is to provide a simple illustration of what happens when a company increases the number ... Read Answer >>
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  3. Why do companies release financial figures in terms of fully diluted shares outstanding?

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  4. Why is an increase in capital stock on a company's balance sheet a bad sign for stockholders?

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  5. Why would I need to know how many outstanding shares the shareholders have?

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