Asked by Abigail Small on May 17, 2024
Verified
In a secondary equity offering, the market value of the old shares determines the price of the new shares.
Secondary Equity Offering
A process where a company that is already publicly traded issues additional shares to investors.
Market Value
The current market valuation at which a service or asset is being offered for sale or purchase.
- Understand the mechanics and implications of initial and secondary equity offerings.
Verified Answer
SB
Sara Beth BryanMay 20, 2024
Final Answer :
True
Explanation :
In a secondary equity offering, the new shares are offered at a price determined by the market value of the old shares. This is because the new shares dilute the ownership of the existing shareholders, so the price of the new shares must reflect the market value of the company's existing equity.
Learning Objectives
- Understand the mechanics and implications of initial and secondary equity offerings.