Seasoned Issue (Stock) - Explained
What is a Seasoned Issuance of Stock?
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Table of ContentsWhat is a Seasoned Issue? How does a Seasoned Issue Work? Seasoned Issue ExampleAcademic Research on Seasoned Issue
What is a Seasoned Issue?
A seasoned issue is a type of secondary issue of stock or additional issues of stock by a company that is already listed on the stock exchange. When a listed company decides to issue additional securities in the market, or trade outstanding bonds, it is a seasoned issue. A seasoned issue is otherwise called a follow-on offering or a seasoned equity offering. The sale of stock by the existing shareholder of a publicly listed company is also called a seasoned issue.
How does a Seasoned Issue Work?
Just like in an initial public offering (IPO), a publicly listed company would hire an investment bank or underwriter to underwrite the issue of additional stocks in the market. A seasoned issue of the secondary offering must be reported to the Securities and Exchange Commission, the commission in charge of market regulation. The proceeds of a seasoned issue are given to the company that issues the secondary offering. In a seasoned issue, the market price of the outstanding shares determines the price at which the additional shares will be sold. Seasoned issues are not only executed by publicly listed companies, but existing shareholdersof a company can also decide to sell all or a portion of their stakes in a company, which also amounts to a seasoned issue.
Seasoned Issue Example
Here is an illustration that will enhance a better understanding of a seasoned issue; Company ABC is a publicly listed company that has sold a number of its shares to investors through an initial public offering. If this company has more stock to issue after an IPO has been concluded, it is called a seasoned issue or a secondary offering. There are different reasons for the seasoned issue, which include the need to raise funds for a company. Also, if the existing shareholders of Company ABC decide to sell their stake in the company, it is an instance of a seasoned issue.
Academic Research on Seasoned Issue