What Is Additional Stock Issuance?

A

The correct answer is A. Secondary Offering.

A company may issue additional shares of its stock to raise additional capital, which is called a secondary offering. Unlike an IPO (Initial Public Offering), which is the first time a company offers shares to the public, a secondary offering is when a company that is already publicly traded issues additional shares.

The purpose of a secondary offering can vary depending on the company's specific situation. A company may issue additional shares to raise funds for expansion, to finance acquisitions or to pay down debt. Additionally, existing shareholders may use a secondary offering as an opportunity to sell some of their shares.

It is important to note that a secondary offering can result in dilution of ownership for existing shareholders. Dilution occurs when additional shares are issued, which can decrease the value of existing shares because the ownership of the company is spread over a larger number of shares.

In contrast to a secondary offering, a private placement is the sale of securities to a small group of accredited investors, while a preferred offering involves the sale of preferred shares rather than common shares of the company.