Chapter 3, Problem 1PS

Summary Introduction

To determine:

Difference between the initial public offer (IPO) and Seasoned equity offering (SEO)

Introduction:

Equity of shareholder generally represents the amount pertaining to which financing of the company is done through preferred and common shares. Stockholder's equity refers to the total asset of the firm minus company's total liabilities.

Answer to Problem 1PS

Initial public offer involves issue of shares by the company for the first time while the seasoned equity offering involves issue of shares by the company that already has its presence in the market

Explanation of Solution

Initial public offering (IPO) refers to the event wherein shares are issued by the private company in the primary capital market to go public for the first time in order to raise capital through equity. This option is usually opted by the company in order to support the fund requirement for the growth and expansion of the business establishment.

"Seasoned Equity offering" (SEO) on the other hand refer to the offering made by the company which is already listed publicly and the shares of the company are already transacted over the capital market. Seasoned Issue and "Follow-on Public Offerings" is the other name for Seasoned Equity offerings.