A public offering involves the sale of new securities and/or the resale of a block of previously issued shares to the general investing public with the objective of attracting interest in the securities from a large number of private and institutional investors. A public offering may be undertaken by a company for the first time as an initial public offering (IPO) or to issue additional shares to the general investing public in a subsequent offering.
An initial public offering (IPO) is the offering of a company’s shares to the general public for the first time, the shares involved being newly issued and/or already existing, whereby a company “goes public”. An offering of more of its new shares after the IPO of a company, which is done as a concession to major investors and to increase the float of the newly issued shares is a follow-on offering.
A subsequent offering is the public sale of additional shares made by companies that are already publicly traded. Through the issuance of new shares, the issuing company receives cash and increases its owners’ equity by a corresponding amount.
Dual-class recapitalizations (DCRs) involve the creation of a second class of common stock that has limited voting rights but typically a prior claim on the company’s earning and a higher dividend, resulting in dual-class common stock, commonly in an initial public offering (IPO). In most cases, the firm creates the new class by distributing limited voting shares pro rata to current common shareholders.
| Select US Companies with Dual-Class Shares | ||||||
| Super-Voting Shares | Controlling Shareholder(s) | |||||
| Market Cap ($bn) | % Market Cap | % of Voting Power | Shareholder(s) | % of Voting Power | ||
| 141.4 | 26.0 | 77.9 | Sergey Brin, Larry Page | 57.5 | ||
| Concast | 81.4 | 0.3 | 33.3 | Brian Roberts | 33.3 | |
| News Corp. | 73.2 | 32.3 | 100.0 | Rupert Murdoch and Harris Trust | 31.2 | |
| Ford Motor | 14.8 | 3.7 | 40.0 | Ford family | 40.0 | |
| Wrigley | 13.8 | 21.6 | 73.4 | Willian Wrigley Jr. | 31.1 | |
| Source: The Economist | ||||||
The sale of newly or previously issued securities without a public offering, commonly directly by the issuer to a limited number of investors is a private placement. A private placement generally implies that the securities will be placed only with a limited number of qualified investors.
Public offerings are generally made to more than a restricted number of private investors, they are publicized, and any road shows promoting will be open to more than a restricted audience. Offerings are usually marketed by investment banks, either individually or in a syndicate.