posted on 06-06-2019

Public Offering

Updated August 8, 2020
Written By
Paul Tracy

What is a Public Offering?

A public offering is a process of issuing new securities for sale to the public.
 

How Does a Public Offering Work?

For example, let’s say the founders of Company XYZ want to sell half of their shares. They need buyers and would like to offer their shares to members of the general public. In order to do that, Company XYZ hires an underwriter, which determines the value of the shares and creates an offering memorandum that discloses important information about the company to potential buyers. The underwriters then conduct the offering, which facilitates the sale of the shares to the public via the stock exchange.

Why Does a Public Offering Matter?

Public offerings are a way to raise capital, which is what companies need to grow and access cash. If a public stock offering is the first of its kind for a company, this is called an initial public offering (or IPO). It is important to note that public offerings are not limited to stock offerings, however; bonds and a variety of other securities also circulate via public offerings.