What is the difference between a primary and a secondary offering?
What the interviewer is testing
Who receives the money.
Answer it out loud firstTake 30–60 seconds, as you would in the room. Then compare with the model answer.
Show the model answer
In a primary offering the company issues new shares and receives the cash, which strengthens its balance sheet — and dilutes existing holders. In a secondary offering existing shareholders sell shares they own; the money goes to them and nothing changes for the company. Many IPOs combine both. After the IPO, a follow-on can likewise be primary, secondary or both.
The full answer
| Primary | Secondary | |
|---|---|---|
| Shares | Newly issued | Existing |
| Proceeds go to | The company | Selling shareholders |
| Dilution | Yes | No (same number of shares) |
| Company's balance sheet | Cash up (or debt down) | Unchanged |
| Typical use | Growth, deleveraging | PE exit, founders cashing out |
A large secondary component can worry investors ("why are insiders selling?"), so the equity story must explain it.
Mistakes to avoid
Saying a secondary dilutes existing shareholders.
Follow-ups they may ask
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