Equity Offering
The issuance and sale of shares in a company to investors, used to raise capital or provide liquidity for existing shareholders.
What is Equity Offering?
An equity offering is the issuance and sale of new or existing shares to investors in exchange for capital. Types include initial public offerings (IPOs), follow-on public offerings (FPOs or secondary offerings), private placements, at-the-market (ATM) programs, and rights issues. Primary equity offerings issue new shares, diluting existing shareholders by increasing total share count; secondary offerings involve existing shareholders selling their shares without creating dilution. Equity financing does not create a repayment obligation, but permanently dilutes ownership and requires ongoing public reporting obligations for listed companies. Offering price is typically set at a discount to current market price to attract buyers and ensure a successful placement.
Example
In September 2020, Tesla, Inc. completed a $5 billion at-the-market (ATM) equity offering, selling new shares incrementally through its sales agent at prevailing market prices rather than through a single priced deal. Tesla used three separate ATM programs in 2020 totaling $12 billion to strengthen its balance sheet and fund capital expenditures for new Gigafactories. The September offering diluted existing shareholders by approximately 0.9% while adding significant liquidity to the balance sheet ahead of the company's S&P 500 inclusion.
Source: Tesla Inc. — SEC Filings