Difference between IPO and Secondary offering

Initial Public Offering (IPO)

An initial public offering (IPO) or stock market launch is a type of public offering where shares of stock in a company are sold to the general public, on a securities exchange, for the first time. Through this process, a private company transforms into a public company. Initial public offerings are used by companies to raise expansion capital, to possiblymoneti e the investments of early private investors, and to become publicly traded enterprises

____________________________________________ Public Offering

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

How It Works !"ample# !or example, let"s say the founders of #ompany $%& 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, #ompany $%& hires an underwriter, which determines the value of the shares and creates an offering memorandumthat 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 It $atters# 'ublic 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 I'(). 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.

Secondary Offering
A secondary offering refers to a large*scale market sale of a company+s shares by a ma,or shareholder. How It Works !"ample# Also called a secondary distribution, a secondary offering is distinguished from an initial public offering(or I'() in that the proceeds generated by the sale of the shares goes to the shareholder rather than the issuing company. The selling shareholder originally paid for the shares in return for the e-uity. In the case of a secondary offering, that shareholder is simply reselling the shares in the market. In this sense, he is recouping the money he originally paid the issuing company in return for the shares. !or example, suppose .ob fully owns half of the total number of outstanding shares of company $%&. .ob originally purchased these from $%& at the time of their I'(. The proceeds generated from that I'( went to $%& as the issuer. .ob now decides, however, that it would be beneficial for him to sell all of his $%& shares in the market. This sale constitutes a secondary offering) because it is the second time those shares have been for sale in the market. The money he makes from the sale of his $%& shares benefits him as well as the previous owner. Why It $atters# The distinction between a secondary offering and an I'( must be understood beyond a simple transfer of stock ownership. The aim of ownership transfer in an I'( is to raise capital funding for this issuing company. A secondary offering simply transfers ownership between investors in the market place. In this sense, it is important to note that secondary offerings, while benefiting selling shareholders, do not financially benefit the issuing company.