Standby equity distribution agreement

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In Finance, SEDA stands for a Standby Equity Distribution Agreement. This is an agreement whereby a small publicly-traded company arranges to raise additional capital by selling new stock without making a formal Secondary Market Offering to the market. Under a SEDA, a financial entity agrees to privately purchase a defined maximum of shares to be offered in specified lots (tranches) over a specified period. The purchaser gets the stock at a discount to the current market price (often 5 percent) and the SEDA usually specifies a maximum stock price which the company agrees to pay. If the company finds that it never needs more funds, it can elect not to sell any shares at all, or to sell only a part of the maximum. The timing of sales is under the control of the company, so it can sell when it believes its share price is high.