What does a secondary stock offer by a company mean?

Question

If someone already has the stock how would a secondary offer effect it?

Answer 1

The company is issuing more shares through their managing brokerage. This increases the total number of shares outstanding, which is generally bad for existing shareholders because their shares then constitute a smaller fraction of the company.

However, if the company is growing relatively quickly and the size of the "secondary" is not very big, it may have little effect on the value of existing shares. Also, it can be a great way for a good smaller company to generate new cap-ex cash when their share price is surging.

Normally the secondary shares are solding only through the managing brokerage (e.g. Morgan Stanley, Citigroup etc.) and you need to be a client of that brokerage to participate. The secondary offering price is usually slightly cheaper than the market price.

Answer 2

When a company "goes public", it makes an initial public offering, or IPO.

Later on, the company may sell more shares. This is a "secondary" offer.

How this would affect someone already holding shares will depend very much on time, circumstances & terms. Usually, though, shareholders are provided "rights" allowing them to purchase the new secondary shares at a fixed price. They can either "exercise" (i.e. use) these rights, or they may be able to sell them.

If there are no rights, or the rights are unsaleable, the shareholder will be "diluted" after the secondary offer. In other words, they will own a smaller percentage of the company than they did before.

Answer 3

Secondary stock, second time offer on the company stock. Price will be different.