A follow-on offering, also known as a follow-on public offering (FPO), is a type of

public offering A public offering is the offering of securities of a company or a similar corporation to the public. Generally, the securities are to be listed on a stock exchange. In most jurisdictions, a public offering requires the issuing company to publish a ...

of stock that occurs subsequent to the company's

initial public offering An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also to retail (individual) investors. An IPO is typically underwritten by one or more investme ...

(IPO). A follow-on offering can be categorised as dilutive or non-dilutive. In the case of the dilutive offering, the company's board of directors agrees to increase the share

float Float may refer to: Arts and entertainment Music Albums * ''Float'' (Aesop Rock album), 2000 * ''Float'' (Flogging Molly album), 2008 * ''Float'' (Styles P album), 2013 Songs * "Float" (Tim and the Glory Boys song), 2022 * "Float", by Bush ...

for the purpose of selling more equity in the company. This new inflow of cash might be used to pay off some

debt Debt is an obligation that requires one party, the debtor, to pay money or other agreed-upon value to another party, the creditor. Debt is a deferred payment, or series of payments, which differentiates it from an immediate purchase. The ...

or used for needed company expansion. When new shares are created and then sold by the company, the number of

shares outstanding Shares outstanding are all the shares of a corporation that have been authorized, issued and purchased by investors and are held by them. They are distinguished from treasury shares, which are shares held by the corporation itself, thus represent ...

increases and this causes dilution of the earnings per share. Usually the gain of cash inflow from the sale is strategic and is considered positive for the longer-term goals of the company and its shareholders. Some owners of the stock however may not view the event as favorably over a more short term valuation horizon. One example of a type of follow-on offering is an at-the-market offering (ATM offering), which is sometimes called a controlled equity distribution. In an ATM offering, exchange-listed companies incrementally sell newly issued shares into the secondary trading market through a designated broker-dealer at prevailing market prices. The issuing company is able to raise capital on an as-needed basis with the option to refrain from offering shares if unsatisfied with the available price on a particular day. The non-dilutive type of follow-on offering is when privately held shares are offered for sale by company directors or other insiders (such as

venture capitalists Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which hav ...

) who may be looking to diversify their holdings. Because no new shares are created, the offering is not dilutive to existing shareholders, but the proceeds from the sale do not benefit the company in any way. Usually however, the increase in available shares allows more institutions to take non-trivial positions in the company. A non-dilutive offering is therefore a type of a secondary market offering. As with an IPO, the

investment bank Investment is the dedication of money to purchase of an asset to attain an increase in value over a period of time. Investment requires a sacrifice of some present asset, such as time, money, or effort. In finance, the purpose of investing i ...

s who are serving as

underwriters Underwriting (UW) services are provided by some large financial institutions, such as banks, insurance companies and investment houses, whereby they guarantee payment in case of damage or financial loss and accept the financial risk for liabilit ...

of the follow-on offering will often be offered the use of a greenshoe or over-allotment option by the selling company.

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{{Corporate finance and investment banking Corporate finance Initial public offering

See also

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