Ask TheStreet: Secondaries

Any dollars raised from these kinds of offerings go directly to the company, through the investment bank that underwrites the offering. That means the company can shore up its finances by selling additional stock, and by increasing the amount of shares in public hands. It also reduces the volatility of the shares already being traded.

However, as investors line up for a piece of a secondary offering, they may be buying when the stock is at risk of becoming dangerously diluted. Dilution has negative connotations simply because the company's shares -- and earnings -- will be spread across more stakeholders. Or, in other words, with more shares available, it decreases each shareholder's level of ownership, and anything that decreases an investor's level of ownership also decreases the value of his holdings.

Despite the added supply, there was still enough demand for Google's shares to send the stock higher from its September secondary offering price. By the end of 2005, Google shares were trading well over $400.

Fast forward to two weeks ago, when Google struck again. In order to accommodate index funds that needed to buy shares of the company as it joined the S&P 500, Google sold 5.3 million shares at $389.75 each.

So will demand for Google shares be satisfied now that this latest heap of stock was dumped onto the market? The IPO couldn't satisfy the demand, which sent the price higher. Neither did the first follow-on offering. Maybe the third time will be the charm.

Then again, maybe not.

How does option expiration influence the price of the underlying stock? Thank you, T

According to TheStreet.com's options guru, Steven Smith, option activity can indeed influence trading in the underlying stock, but the impact is very short-term. For example, if an order comes in to buy a big slug of put options (bets that the stock will go down), the market makers selling the options to facilitate the trade would need to hedge the puts they sold by selling stock. This would create some short-term selling pressure.