Seasoned Equity Offering
AdvancedA seasoned equity offering is the sale of new shares by a company whose shares are already publicly traded, to raise additional capital.
After its initial public offering, a company may need more money for growth, acquisitions, paying down debt or strengthening its balance sheet. Issuing new shares through a seasoned equity offering, also called a follow-on offering, is one way to raise it.
For example, a listed company might issue 10,000,000 new shares at 20 each, raising 200,000,000 before fees.
Seasoned offerings can be marketed to investors over several days, sold quickly to institutional investors in an accelerated offering, or offered first to existing shareholders through a rights issue.
Issuing new shares dilutes existing shareholders, and the share price often falls when an offering is announced. Research suggests this partly reflects a signal: managers may prefer to issue shares when they believe the shares are fully priced, so investors may interpret an offering as a sign that the shares are overvalued. New shares are usually priced at a small discount to the current market price to attract buyers.
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