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Offering discount

The gap between an offering's price and the market price just before it, the concession paid to get a large block of stock placed at once.

Discounts widen with deal size relative to average volume, with volatility, and with how much the buyers distrust the seller. A liquid large cap might place stock at a 2% discount; a micro cap raising a quarter of its market value may pay 20% plus warrants.

Traders use the offer price as a reference level for days afterwards. It is where the new holders' cost basis sits, so it often acts as both support and a supply ceiling.

Example: a stock closes at $24.00 and the deal prices at $22.80. The discount is $1.20 / $24.00 = 5%. Buyers of a 12M share deal receive $14.4M of immediate paper gain relative to the prior close.

Related: follow-on-offering, secondary-offering, underwriter, dilution, rights-issue

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