In an equity offering, a company issues new shares and sells them to the public or to selected investors. The main goal is to raise capital for expansion, debt reduction, acquisitions, or other strategic projects. Unlike borrowing, an equity offering does not create interest payments or new debt, but it does dilute existing shareholders by increasing the total number of shares.
There are different types of equity offerings. A primary offering involves a company creating and selling new shares, while a secondary offering involves existing shareholders selling their shares. Some offerings happen through public markets, and others occur privately with institutional investors. Companies choose the structure based on market conditions, funding needs, and investor demand.
Equity offerings are common for both public and private companies. Public companies may use follow-on offerings after their IPO to raise additional funds. The offering price is often determined through analysis of the company’s financials, current market conditions, and investor interest. Once shares are issued, they trade in the open market like any other stock.
Equity offerings help companies access large amounts of capital without taking on debt. For investors, offerings create opportunities to buy shares—often at a set offering price—but also introduce dilution that can affect existing share value.
Companies can issue primary offerings, where new shares are created and sold to raise capital directly for the business. They can also do secondary offerings, where existing investors sell their shares without raising new money for the company. Other forms include rights offerings, which give current shareholders the chance to buy new shares at a discount, and private placements, which target institutional investors rather than the public.
Equity offerings dilute existing ownership because the total number of shares increases. This can temporarily pressure the stock price, especially if the market believes the offering was poorly timed or too large. However, if the capital raised strengthens the business—such as funding growth or reducing debt—the long-term impact may be positive. Investors usually evaluate both the dilution and the purpose of the capital raise.
Banks and advisors analyze market conditions, recent trading activity, the company’s financial health, and investor demand. For public companies, the offering price is usually set at a small discount to encourage participation. In private placements, the price may be negotiated directly with institutional investors. The price must balance raising capital and maintaining investor confidence.
A biotech company needs funding to continue clinical trials. It issues new shares through a primary equity offering and raises $150 million. While existing shareholders experience dilution, the new capital helps the company move forward with important research.
FinFeedAPI’s SEC API provides access to offering-related filings such as S-1, S-3, and prospectus documents, giving users clear information on the size, structure, and purpose of equity offerings.
