Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Impact Day

What it is:

An impact day is the day on which a company's secondary offering begins trading.

How it works (Example):

Let's say Company XYZ is a public company and would like to sell additional shares in order to raise money to build a new factory. This sale of additional shares is called a secondary offering. Company XYZ would hire an investment bank to underwrite the offering, register it with the SEC, and handle the sale. The company receives the proceeds from the sale of the shares.

Company XYZ is not the only entity that can effect a secondary offering, however. Let's say you own a very large block of Company XYZ shares -- maybe 100,000 shares. In this type of secondary offering, the seller -- which is not Company XYZ in this case -- receives the proceeds.

Why it Matters:

Impact days signal when the number of outstanding shares increases. Accordingly, impact days also signal a decrease in a company's earnings per share and thus the share price might decline.
 

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