Why would a company choose a primary offering over secondary offering?

A company would choose a primary offering primarily to raise new capital for its business operations and growth initiatives. In a primary offering, new shares are issued and sold to investors, thereby generating fresh funds that the company can use for various purposes such as expanding its operations, funding research and development, or investing in new projects. This influx of capital is essential for a company looking to grow, innovate, or strengthen its financial position.

The choice of a primary offering over other types of offerings is often driven by the need for additional cash to support strategic objectives. It enables the company to enhance its balance sheet without increasing debt, offering a potentially lower-cost alternative to borrowing.

In contrast, other options are not aligned with the primary offering's purpose. For instance, the option regarding allowing existing shareholders to sell their shares pertains to a secondary offering, where the focus is on liquidity for current investors rather than raising funds for the company itself. The choice to close a company or pay off existing debts may stem from specific financial strategies or operational decisions, but they do not reflect the fundamental purpose of conducting a primary equity offering. Thus, the decision to proceed with a primary offering specifically aims at capital generation for the company.