What is a 'General Public Distribution'

A general public distribution is a type of primary market offering in which the securities being issued are available to anyone who has the ability to purchase them. This differs from conventional public distributions of securities in which underwriting investment banks sell large blocks of the issued securities to large investors.

BREAKING DOWN 'General Public Distribution'

If you take part in a general public distribution of securities, you are participating in what is called the primary market: you are buying securities directly from the issuing company, and your funds go to it to finance its business activities. This is in contrast to the secondary market, where investors buy and sell securities from each other, with funds moving back and forth from investor to investor without involving the underlying company at all. The process by which a company makes it shares available for sale to the public is known as going public, and it is used to convert a company from a private firm, or one with no general shareholders, to a public firm, or one with general shareholders.

Why Companies Offer General Public Distributions

Companies usually offer shares to the general public and other investors in order to raise capital to fund expansion, build new facilities, hire new employees, research and develop new products and buy more equipment. Each share a company sells represents partial ownership of that company. The method of raising money by selling shares through a general public distribution or other primary market is known as equity financing and differs from selling bonds or derivatives.

Advantages of a General Public Distribution

A primary advantage of selling shares on the primary market is that investors’ money goes directly to the company issuing the shares, rather than to another investor selling the shares, as it would on the secondary market. Early private investors may also monetize some or all of their investment in a company by offering their shares as part of the initial public offering (IPO).

A general public distribution allows a company to raise a large amount of money from investors in the marketplace. This can help it diversify and grow its equity base, give it access to cheaper capital, enhance its brand and public image, and help it attract and retain better talent. A general public distribution allows companies to exercise more financing options by making them more attractive candidates for bank loans, and it can smooth the acquisitions process.

RELATED TERMS
  1. Primary Offering

    A primary offering is the first issuance of stock from a private ...
  2. Issue

    An issue is the process of offering securities as an attempt ...
  3. Distribution Management

    Distribution management refers to overseeing the movement of ...
  4. Offering Price

    The offering price is the price at which publicly issued shares ...
  5. Initial Offering Date

    An initial offering date is the date on which a security is first ...
  6. Public Offering Price (POP)

    The public offering price (POP) is the price at which new issues ...
Related Articles
  1. Insurance

    Brokerage Functions: Underwriting And Agency Roles

    Learning about these various activities can give insight into how securities are issued and traded.
  2. Investing

    Why Public Companies Go Private

    Privatization can give management more time to make money for investors, but at what cost?
  3. Managing Wealth

    How to invest in private companies

    It can be tough to analyze a company that doesn't trade publicly, but there are several advantages to investing in private companies.
  4. Insights

    Why Are Companies Taking Longer To Go Public?

    Learn why private companies are waiting longer to have their IPOs. Understand why it may be more advantageous for a company to stay private.
  5. Investing

    How an IPO is valued

    The initial valuation of an IPO can determine the success or failure of a specific stock – but how is that price determined?
  6. Investing

    Expect Big Capital Gains Distributions from These Funds (AGTHX, ACRNX)

    The steady rise in the markets since 2009 has led to some outsized gains in a few funds that are finally being realized as long-term winning holdings.
  7. Managing Wealth

    Issued share capital versus subscribed share capital

    Subscribed share capital is very different from issued share capital, which is the actual issued stock.
  8. Insurance

    4 Signs A Private Company Is Going Public

    There are several signs that can indicate that a company is about to make the big leap. Find out what they are.
  9. Financial Advisor

    Tough Times: Should You Dip Into Your Qualified Plan?

    401(k)s, pensions and profit-sharing plans can be a source of cash, but there are consequences to this option.
  10. Investing

    What Are Corporate Actions?

    Be a savvy investor - learn how corporate actions affect you as a shareholder.
RELATED FAQS
  1. After an initial public offering, does a company profit from increases in its share ...

    The short answer is "no". To understand why, recall that the stock market is actually comprised of two markets - a primary ... Read Answer >>
  2. What does "going public" mean?

    Going public refers to a private company's initial public offering (IPO), thus becoming a publicly traded and owned entity. ... Read Answer >>
  3. How does privatization affect a company's shareholders?

    The most recognized transition between the private and public markets is an initial public offering (IPO). Through an IPO, ... Read Answer >>
Trading Center