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Selling Shareholders
The difference between Follow-on Public Offering (FPO) and an Offer for Sale (OFS) lies in the source of the shares being offered to the public. In an FPO, the company issues and offers additional shares directly to the public, while in an OFS, existing shareholders sell their shares to the public. 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.
Why is an FPO Important for Companies?
The company used the capital it raised to purchase new storefronts and hire additional staff. A follow-on offering, also known as a follow-on public offering (FPO), is a type of public offering of stock that occurs subsequent to the company’s initial public offering (IPO). Some companies may also conduct follow-on offerings in order to raise capital to refinance debt during times of low interest rates. Investors should be cognizant of the reasons that a company has for a follow-on offering before putting their money into it. In some cases, the company might simply need to raise capital to finance its debt or make acquisitions.
What happens in an FPO?
- Existing shareholders, such as founders, executives, or early investors, may sell their shares through secondary offerings to monetize their investments.
- A Follow-On Public Offer, or FPO, is when an already listed company decides to issue new shares to investors.
- Our work has been directly cited by organizations including Entrepreneur, Business Insider, Investopedia, Forbes, CNBC, and many others.
- It has also led to greater market volatility, affecting the timing and success of follow-on offerings.
- In the case of a dilutive FPO, the issue of new shares can lead to the dilution of existing shareholders’ equity.
Secondary offerings are an essential tool for companies seeking to raise capital, what is follow on public offer provide liquidity to shareholders, and expand their investor base. FINRA, a self-regulatory organization in the U.S., enforces rules related to secondary offerings, such as ensuring fair and transparent pricing and marketing practices. Prices at which FPO shares are offered are a discount to the market price.
A follow-on public offer (FPO) is when a company already listed on an exchange issues new shares to investors. The offer is an issuance of additional shares made by a company after an initial public offering (IPO). Each type has its unique characteristics, advantages, and disadvantages, depending on the company’s goals and market conditions. The purpose of a secondary offering is usually to provide liquidity for existing shareholders or to raise additional capital for the selling shareholders.
Current global economic trends, such as low-interest rates, have made raising capital through equity more attractive. As a result, many companies are turning to FPOs as a way to fund their growth strategies. Priority may be given to certain categories of investors, such as institutional investors.
An initial public offering (IPO) bases its price on the health and performance of the company, and the price the company hopes to achieve per share during the initial offering. Since the stock is already publicly-traded, investors have a chance to value the company before buying. A CMPO is a type of secondary offering where a company privately markets its shares to institutional investors before publicly disclosing the offering. This approach allows the company to gauge investor interest and determine the appropriate pricing for the offering. Certain prerequisites for the new offering are categorized as a follow-on public offering.