Assuming that managers have inside information about the firm, outsiders are most prone to adverse selection in equity offers since managers may offer stock when they know the offer price exceeds their private assessments of the company's value.
Managers have inside information about the firm. This is what outsiders are assuming. Outsiders are most prone to adverse selection in equity offers. Managers may offer stock. The offer price exceeds their private assessments of the company's value. This is what they know.