An impact day is the date a company is scheduled to release a secondary offering of shares. This causes the number of outstanding shares to increase and also creates a jump in supply. Subsequently, the per share value usually falls in response. Companies plan ahead when developing a secondary offering to reduce the risks that will occur on the impact day. This planning process involves underwriters and many other financial professionals who help select a date for the release and assist with other stages of the process.
Companies can make a secondary offering for a number of reasons. There may be a desire to increase the amount of outstanding stock. Secondary offerings can also be used to increase market capitalization, providing funds that may be needed for expansions, development, and other projects. If a company times a secondary offering well, it will sell quickly on the impact day, demonstrating that there is demand for the new shares and bolstering investor confidence.
For existing shareholders who bought during the initial public offering, the impact day does not just drag down the share value. It also dilutes their power as shareholders, because more of the company is held by other people. Major shareholders may attempt to address this problem by buying up part of the secondary issue to retain control. Companies can also use this to their advantage, weakening shareholders by making a secondary issue that decreases the strength of their votes.
Movement on a stock during an impact day tends to be closely observed. Investors are concerned about the value of their stocks and people who follow the market in general may be interested to see how much the stock moves. This can provide information about how much interest there is in a company, how well the economy in general is doing, and other factors that could be of interest. Share prices can be tracked throughout the day by following stock tickers that provide regular updates.
Sometimes, even the best planned impact day goes awry. Because the release of a secondary offering is planned well in advance, if it happens to coincide with a natural disaster or political catastrophe, the company has no choice but to proceed. Major news items, good or bad, tend to impact the stock market and can cause a new issue to fall flat. Such events are not predictable, and this will be accounted for in analysis of how the offering went.