How are shares typically sold in an overnight follow-on offering?

In an overnight follow-on offering, shares are predominantly sold to institutional investors. This approach is common because institutional investors are typically looking to acquire larger blocks of stock and have the resources to conduct due diligence quickly. Selling these shares at a discount incentivizes institutional investors to quickly commit capital, which helps in achieving a successful and efficient capital raise for the issuing company.

This dynamic is crucial for maintaining market stability and ensuring that the offering can be executed smoothly, as institutional investors have the market influence necessary to absorb larger quantities of shares without destabilizing the stock price. The discount also serves as a way to compensate these investors for the urgency and risk associated with participating in the offering.

By contrast, options that suggest shares are sold exclusively to individual investors or mutual funds without negotiation overlook the reality of how these offerings are structured and executed in today's market, where institutional participation is key. The notion of selling shares to any investor with no discount also misrepresents the common practices in capital markets, where price sensitivity plays an essential role in the underwriting process.