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Sometimes we can get news about "XXX Company Announces Proposed Public Offering of Common Stock". What does that mean? Does it mean the company is in good shape or in a bad situation? Its stock price will go up or go down?

And also this "XXX Announces Closing of $250.0 Million Registered Direct Offering of Common Stock". Does it mean the company's stock was diluted?

It is not a good thing because the same amount of value has more owners?

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  • #1 The company's got to be in good enough shape for analysts to want to buy the stock. #2 Yes. #3 The existing owners had to approve the dilution. – RonJohn Jan 16 at 0:01
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"XXX Company Announces Proposed Public Offering of Common Stock" means that the company is selling shares to the public. This could be an Initial Public Offering (IPO) or it could be a secondary offering.

Whether a secondary offering is dilutive depends on whether the shares offered are newly created or if they are existing shares owned shares owned company. Dilutive offerings decreases earnings per share which increases the P/E ratio so price should fall to restore the former P/E ratio.

In a "Direct Offering of Common Stock", the company going public offers it shares directly to the public rather than utilizing an investment bank (or consortium of banks) to go public.

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  • Dilutive offerings shouldn’t reduce the share price, because they increase the total value of the company by increasing its cash reserves by the amount for which it sells the extra shares. – Mike Scott Jan 16 at 7:29
  • And yet when a company floods the market with dilutive secondary offerings, share price drops. EPS and P/E are not a function of the value of the company. – Bob Baerker Jan 16 at 12:47
  • Mike is correct that the secondary offering does not change the value (except for fees paid by the company to Wall Street). Bob is also correct in that shareholders often take a dim view of secondary offerings, driving the price down. Shareholders do not often trust company managers to spend the cash infusion wisely. – Orange Coast- reinstate Monica Jan 27 at 8:11

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