When it comes to stock exchange, there are lots of opportunities that await beginner and professional investors. To earn money in this big game, you need to understand just how it works and how to build a trading system that will make you money. Among the many things that you can buy and sell in the stock market are secondary stock offerings.
So what are secondary stock offerings? These are actually new stocks issued for public sale by a company that has already made their initial public offering or IPO. Secondary stock offerings are typically issued in the secondary market.
Why do some companies sell their stocks as secondary public offerings? One of the best reasons for this is because they need cash to expand and grow their business. They can use the money after selling the stock to beef up their property, plant, and equipment to expand market share, or simply for research & development. Other company will choose to do this as well if they do not have money to acquire a smaller company that will establish their foothold in an emerging market.
Another definition for secondary stock offering is a sale of securities in which a certain stockholder for a corporation sells out a big chunk of his shares. The proceeds are then paid to the said shareholder who sold his shares. Meanwhile, the company that issued the said shares gains a large portion of what was issued.
Significant shareholders that choose to sell could be former owners of the company after a merger. Other shareholders with a significant stake in the company could be the CEO and members of top management. They may do so if they feel that they will be relocated or if they think that it is time for them to resign. When this happens, the share value of the company can be unpredictable.
In spite of this, secondary stock offerings are still viewed as a way to fuel company growth. Through this, corporations can finance projects that can bring in revenue for the company in the long-term future. In short, this could be a way for them for achieve financial growth and business success.
Again, let it be remembered that secondary stock offerings are not meant to be a way of increasing stocks in the stock market. By selling these shares in the secondary market, there is no dilution of the existing number of shares nor are there any brand new shares be issued.
Another reason why veteran investors choose this kind of offering is the fact that they can gain the support of the brokers. Due to a large volume of secondary stock offerings issued every year, a trader can earn a lot even if there is only a little percentage for trade-off. Companies that issue this benefit a lot from the additional capital that is infused to the company. This fact alone is a very encouraging way to opt for secondary stock offerings. It serves as the answer for the financial problems of companies. Instead of resorting to the bank for a loan, secondary market offerings can help them push their business to the next level without the added pressure of incurring interest.
C.L. King & Associates is a full-service investment bank and self-clearing broker-dealer. CL King’s deep buy-side relationships constitute a formidable distribution channel for stock offerings large and small. Our strategies are available through separately managed accounts, mutual funds, and onshore and offshore long/short funds — all of which draw upon the same fundamental research and investment process that have been the key drivers behind our significant, long-term outperformance.
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