Personal Finance & Money Asked on July 14, 2021
Sometimes we can get news about "XXX Company Announces Proposed Public Offering of Common Stock". What does that mean? Does it mean the company is in good shape or in a bad situation? Its stock price will go up or go down?
And also this "XXX Announces Closing of $250.0 Million Registered Direct Offering of Common Stock". Does it mean the company’s stock was diluted?
It is not a good thing because the same amount of value has more owners?
"XXX Company Announces Proposed Public Offering of Common Stock" means that the company is selling shares to the public. This could be an Initial Public Offering (IPO) or it could be a secondary offering.
Whether a secondary offering is dilutive depends on whether the shares offered are newly created or if they are existing shares owned shares owned company. Dilutive offerings decreases earnings per share which increases the P/E ratio so price should fall to restore the former P/E ratio.
In a "Direct Offering of Common Stock", the company going public offers it shares directly to the public rather than utilizing an investment bank (or consortium of banks) to go public.
Correct answer by Bob Baerker on July 14, 2021
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