Banking Practice Exam

When a firm has stock that is already publicly traded and decides to issue more shares, this process is referred to as a secondary offering.

This type of offering occurs when a company offers additional shares to investors, which can either be newly issued shares or existing shares that were previously held by insiders or other shareholders. The secondary offering serves to raise additional capital for the firm while also providing liquidity for current shareholders who may wish to sell some of their holdings. It can also dilute the ownership percentage of existing shareholders if new shares are issued, but it allows the company to capitalize on favorable market conditions or fulfill funding needs.

In contrast, a primary offering typically refers to the initial sale of shares when a company goes public, while terms like “second time equity offering” and “flavored offering” are either non-standard terms or do not accurately describe the action of issuing additional shares after an initial public offering. Therefore, secondary offering is the correct terminology in this context.