What Are Seasoned Offerings and How They Affect Investors?

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What Are Seasoned Offerings and How They Affect Investors?


This is a continuation of our previous article on Initial Public Offerings (IPO). If you haven't read that then it is highly recommended that you read that article first. Here's the link: Demystifying IPO.

Let's start.

A seasoned offering is when a publicly traded company issues new shares of stock to raise money. The company generally uses the money from the seasoned issue to pay down debt, fund new projects, or grow the business. A seasoned offering can be either dilutive or non-dilutive, depending on whether the new shares are issued by the company or sold by existing shareholders.

Seasoned offerings are important for companies and investors because they can provide a source of capital for the former and an opportunity for the latter. Companies can use seasoned offerings to improve their financial position, expand their operations, or acquire other businesses. Investors can use seasoned offerings to buy more shares of a company they believe in, diversify their portfolio, or take advantage of a lower share price.


Some examples of recent seasoned offerings by well-known companies are:

  • On April 13, 2021, Coinbase (NASDAQ: COIN) completed a direct listing of 114.9 million shares on the Nasdaq, raising about $8.1 billion. The direct listing was a non-dilutive seasoned offering, as no new shares were created, and only existing shareholders sold their shares.
  • On March 24, 2021, Tesla (NASDAQ: TSLA) announced that it would sell up to $5 billion worth of common stock through an at-the-market offering. The at-the-market offering was a dilutive seasoned offering, as new shares were issued by the company at prevailing market prices. Tesla said it would use the proceeds for general corporate purposes.
  • On February 25, 2021, Airbnb (NASDAQ: ABNB) filed a prospectus for a secondary offering of 51.9 million shares, of which 50.5 million shares were offered by existing shareholders and 1.4 million shares were reserved for employee stock plans. The secondary offering was a non-dilutive seasoned offering, as no new shares were issued by the company and only existing shareholders sold their shares.


Types of Seasoned offerings

There are different types of seasoned offerings, such as primary, secondary, and mixed offerings, and they have different effects on the share price and value of the company.

  • A primary offering is when the company issues new shares and sells them to the public. This increases the number of shares outstanding and dilutes the ownership of existing shareholders. The company receives the proceeds from the sale and can use them for various purposes, such as paying down debt or funding new projects. A primary offering can lower the share price because it increases the supply of shares and reduces the earnings per share (EPS) of the company.
  • A secondary offering is when existing shareholders, such as founders, executives, or investors, sell their shares to the public. This does not increase the number of shares outstanding or dilute the ownership of existing shareholders. The company does not receive any proceeds from the sale and has no control over the timing or price of the offering. A secondary offering can also lower the share price because it signals that the insiders are cashing out or have a negative outlook on the company’s future prospects.
  • A mixed offering is a combination of a primary and a secondary offering, where the company and some existing shareholders both sell their shares to the public. This partially increases the number of shares outstanding and dilutes the ownership of existing shareholders. The company receives some of the proceeds from the sale and shares them with the selling shareholders. A mixed offering can have a mixed effect on the share price, depending on the proportion of primary and secondary shares, the use of proceeds, and the market perception of the offering.

Pros & Cons

Seasoned offerings can have advantages and disadvantages for both the issuing company and the existing shareholders, depending on the type and purpose of the offering.


For the issuing company, some of the advantages of seasoned offerings are:
  • They can provide a source of capital to improve the financial position, expand the operations, or acquire other businesses.
  • They can increase the liquidity and marketability of the shares, as well as the public awareness and reputation of the company.
  • They can reduce the cost of capital and the financial risk of the company, especially if the offering is used to pay down debt or reduce leverage.

Some of the disadvantages of seasoned offerings for the issuing company are:
  • They can dilute the ownership and earnings per share (EPS) of the existing shareholders, if the offering is a primary offering (i.e., new shares are issued by the company).
  • They can signal a negative information or a lower valuation of the company, if the offering is a secondary offering (i.e., existing shareholders sell their shares) or if the offering is priced below the current market price.
  • They can incur transaction costs and fees, such as underwriting, legal, and accounting expenses, as well as regulatory and disclosure requirements.

For the existing shareholders, some of the advantages of seasoned offerings are:
  • They can increase the value of their shares, if the offering is used for positive net present value (NPV) projects or if the offering conveys a positive signal or a higher valuation of the company.
  • They can diversify their portfolio or realize their gains, if the offering is a secondary offering or if they participate in the offering as sellers.
  • They can maintain their proportional ownership and avoid dilution, if the offering is a rights offering (i.e., existing shareholders have the first option to buy the new shares).
Some of the disadvantages of seasoned offerings for the existing shareholders are:
  • They can decrease the value of their shares, if the offering is dilutive, if the offering signals a negative information or a lower valuation of the company, or if the offering is used for negative NPV projects.
  • They can face a higher risk of agency problems, if the offering is used for managerial entrenchment or empire building, or if the offering increases the free cash flow available to the managers.
  • They can incur transaction costs and fees, such as brokerage commissions, taxes, and opportunity costs, if they participate in the offering as buyers or sellers.

Influencing factors

There are several factors that influence the decision to issue seasoned offerings, such as:

  • Market conditions: The company may want to take advantage of favorable market conditions, such as high stock prices, low interest rates, strong investor demand, or positive industry trends, to issue seasoned offerings at a higher valuation and lower cost of capital.
  • Growth opportunities: The company may need to raise funds to pursue growth opportunities, such as expanding its operations, acquiring other businesses, launching new products, or entering new markets.
  • Financial needs: The company may face financial needs, such as paying down debt, refinancing existing obligations, improving its liquidity, or meeting regulatory requirements, that require additional capital.
The decision to issue seasoned offerings also depends on the type and purpose of the offering, as well as the expected impact on the share price and value of the company. A seasoned offering can be either dilutive or non-dilutive, depending on whether the new shares are issued by the company or sold by existing shareholders. 
  • A dilutive offering can lower the share price and the earnings per share (EPS) of the company, but it may also create long-term value if the proceeds are used for positive net present value (NPV) projects. 
  • A non-dilutive offering does not affect the share price or the EPS of the company, but it may signal a negative information or a lower valuation of the company, if the insiders are cashing out or have a pessimistic outlook on the future prospects. Therefore, the company needs to balance the benefits and costs of issuing seasoned offerings and communicate its rationale and plans to the investors and the market.

Ending Note

Seasoned offerings can have advantages and disadvantages for both the issuing company and the existing shareholders, depending on the type and purpose of the offering.
Some insights or recommendations for investors who are interested in seasoned offerings are:
  • Investors should research and analyze the company’s financial performance, growth prospects, competitive position, and strategic plans before investing in a seasoned offering.
  • Investors should also consider the timing and pricing of the offering, as well as the market conditions and industry trends, to determine the potential value and risk of the investment.
  • Investors should be aware of the possible dilution or signaling effects of the offering, and how they may affect the share price and the earnings per share (EPS) of the company.
  • Investors should evaluate the use of proceeds and the expected impact of the offering on the company’s capital structure, leverage, liquidity, and profitability.
Some challenges or trends that affect the seasoned offering market are:
  • The COVID-19 pandemic and the resulting economic downturn have reduced the demand and appetite for seasoned offerings, as investors are more cautious and risk-averse.
  • The regulatory environment and the disclosure requirements for seasoned offerings have become more stringent and complex, increasing the costs and time involved in the process.
  • The emergence of alternative financing methods, such as private equity, venture capital, crowdfunding, and SPACs, have increased the competition and reduced the attractiveness of seasoned offerings.



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