A firm listed on a stock exchange will issue shares to investors as part of a follow-on public offer (FPO). An issuance of extra shares by a firm following an IPO is known as a follow-on offering. (IPO).
Secondary offerings are another name for follow-on offerings.
KEY TAKEWAYS
- After a company’s initial public offering (IPO), more shares are issued in a follow-on public offer (FPO), often referred to as a secondary offering. (IPO).
- FPOs are typically announced by businesses to raise stock or lower debt.
- The two primary FPO types are non-dilutive, in which existing private shares are sold to the public, and dilutive, in which additional shares are added.
- A corporation can raise cash through an at-the-market (ATM) offering, a sort of FPO, by offering secondary public shares on any given day, typically based on the current market price.
- A firm listed on a stock exchange will issue shares to investors as part of a follow-on public offer (FPO). A follow-on offering is when a corporation issues more shares following an initial public offering.
How a Follow-on Public Offer (FPO) Works
FPOs and IPOs, or the initial public offering of equity to the public, should not be confused. After a corporation is registered on an exchange, additional issues called FPOs are made.
Similar to an IPO, follow-on public offers require corporations to complete U.S. Securities and Exchange Commission (SEC) paperwork.
Types of Follow-on Public Offers (FPOs)
There are two main types of follow-on public offers:
This form of follow-on public offering aims to obtain capital to lower debt or grow the business, increasing the number of shares outstanding in the process.
Non-dilutive follow-on public offers are the other variety.
Diluted Follow-on Offering
The earnings per share (EPS) declines as the number of shares rises. The most common uses for the money raised through an FPO are debt reduction and capital structure changes. The addition of cash is beneficial to the company’s long-term prospects and, as a result, to its shares.
Non-Diluted Follow-on Offering
Holders of current, privately held shares can sell previously issued shares on the open market through non-diluted follow-on offerings. When stock is sold non-diluted, the cash proceeds are given to the shareholders who sold the stock on the open market.
At-the-Market (ATM) Offering
An at-the-market (ATM) offering gives the issuing company the ability to raise capital as needed. If the company is not satisfied with the available price of shares on a given day, it can refrain from offering shares. ATM offerings are sometimes referred to as controlled equity distributions because of their ability to sell shares into the secondary trading market at the current prevailing price.
