Seasoned equity offering (SEO)

Definition

A seasoned equity offering (SEO) is the process by which a publicly traded company issues additional shares to raise capital. Unlike an initial public offering (IPO), an SEO is conducted after the company has already gone public.

5 Must Know Facts For Your Next Test

1. SEOs are often used to raise funds for expansion, paying down debt, or other corporate purposes.
2. The announcement of an SEO can sometimes lead to a temporary drop in the company's stock price due to dilution concerns.
3. Investment banks typically underwrite these offerings, helping determine the offer price and managing the sale process.
4. Existing shareholders may have preemptive rights to purchase new shares at a discount during an SEO.
5. SEOs can be conducted via various methods including rights offerings and follow-on public offerings.

Review Questions

• What is the primary difference between an IPO and an SEO?
• Why might a company's stock price temporarily decrease following the announcement of an SEO?
• What role do investment banks play in a seasoned equity offering?

Related terms

Initial Public Offering (IPO): The first time a company offers its shares for public sale on a stock exchange.

Rights Offering: A method of raising capital where existing shareholders are given the right to purchase additional shares at a discount before they are offered to the general public.

Underwriting: The process by which investment banks manage the issuance of new securities, including determining pricing and buying any remaining unsold shares.