Module III· ECM — Follow-on, ABB, Rights IssueIntermediate
Question
What is the difference between primary and secondary offering, and how do they affect existing shareholders?
Answer
Primary offering issues new shares, so proceeds go to the company and existing shareholders are diluted. Secondary offering sells existing shares, so proceeds go to selling shareholders and there is no share-count dilution, but free float and supply increase. Investors assess use of proceeds, seller motivation, and discount.