The process usually requires registering the offering with the regulatory authorities as well as a stock exchange. A secondary offering is therefore the of er for sale of securities already issued to the wider investing public.
It differs from the situation where a listed company creates and sells new securities to either investors, current shareholders, or new and current shareholders—a seasoned equity offering. It encompasses situations where a large block of shares, for instance, is turned over to the investor’s broker to sell on the stock market over a number of days—a block trade.
Such block trades may occur even without the knowledge of the company and does not involve any notification of the regulatory authorities. It also includes pre-IPO shareholders selling some of their shares (secondary shares) in an initial public offering. An initial public offering that consists solely in the sale of shares by pre-IPO share-holders is also a secondary offering.
In a secondary offering, the money raised goes to the selling security holders and not the company. The selling shareholders therefore bear the costs of such offerings price declines on announcement and underwriting fees. Secondary offerings reduce the ownership stake of those who sell—such as founders—but do not dilute their holdings.