Types of Securities Offerings
When a company issues and sells new securities to the public, it is called a primary offering. The proceeds of a primary offering go to the issuer of the securities. When new securities are sold for the first time to the public, the offering takes place in what is called the primary market.
If the company has never issued common stock before, the first offering of shares is referred to as an initial public offering (IPO). Once the shares have been registered with the SEC and purchased in the public offering, the shares can be freely traded with other investors. The market for shares that are bought and sold by the public at large is called the secondary market. The proceeds of these sales do not go to the issuer, but instead go to the party who is selling the shares.
If a company decides to sell additional shares to the public after the initial public offering, it is called a follow-on offering, or secondary offering. A follow-on may be offered by a seasoned company that is funding new growth, a struggling company strapped for cash, or a major investor that wishes to liquidate some or all of her holdings.
In most public offerings, an issuer will register and issue a specified number of securities and will attempt to sell all the securities in one day. If an issuer has issued securities previously and is a large enough company, it may file what is called a shelf registration (shelf offering). A shelf registration is when an issuer files one registration statement for a large number of securities and does not sell them imme