What it is:
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 of additional shares is called a seasoned issue. Company XYZ would hire an investment bank to underwrite the , 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 seasoned issue, however. Let's say you own a very large block of Company XYZ shares -- maybe 100,000 shares. In this type of seasoned issue, the seller -- which is not Company XYZ in this case -- receives the proceeds.
Why it matters:
Seasoned issues can dilute existing shareholders considerably if the
In many cases, seasoned issues from existing shareholders often involve founders or other managers (such as venture capitalists) selling all or a portion of their stakes in a company. This is often the case if the company's original IPO included a "lock-up" period during which the founding shareholders were not allowed to sell their shares. Seasoned issues thus give these shareholders a way to monetize their positions. Seasoned issues may also signal that a company is running short on .
Regardless of the reason, selling a large of shares all at once can exert downward pressure on the 's price -- a situation that is exacerbated when the stock is already thinly traded.