What Is a Follow-on Public Offer (FPO)?

A follow-on public offer (FPO) is the issuance of new shares by a public company after its initial public offering (IPO). As such, FPOs mean that additional shares are offered to the public by companies that are already listed on exchanges. Follow-on public offerings, which are also known as 澳洲幸运5官方开奖结果体彩网:secondary offerings, are generally used by companies to raiꦫse addit🦩ional capital for their growth.

How Follow-on Public Offers (FPOs) Work

澳洲幸运5官方开奖结果体彩网:Public companies can complete an FPO by offering additional shares on the open market. They can also take advantage of an FPO through an offer document. FPOs aౠllow publicly traded companies to raise additional capital by issuing and selling nꦺew shares via a stock exchange.

Proceeds from the sale go to the company issuing the stock. Similar to an IPO, companies that want to execute a follow-on public offer must fill out 澳洲幸运5官方开奖结果体彩网:Secuౠrities and Exchange Commission (SEC) documents.

This capital can be used for different purposes. Among the primary reasons behind any new issuance of stock is to pay off existing debt or fund growth ✤through:

• 澳洲幸运5官方开奖结果体彩网:Research and development (R&D)
• Releasing new products and services
• Targeting new markets

Types of Follow-on Public Offers (FPOs)

There are tw🍨o main types of follow-on public offers. Dulutive and non-dilutive.

Diluted Follow-on Offering

The first type of FPO is dilutive to investors, as the company’s board of directors agrees to increase the 澳洲幸运5官方开奖结果体彩网:share float level or the number of shares available. This kind of follow-on public offering seeks to raise money to reduce debt or expand the business, increasing the number of shares outstanding and decreasing the 澳洲幸运5官方开奖结果体彩网:earnings per share (EPS) decrease.

The funds raised during an FPO are most frequently allocated to𒊎 reduce debt or change a company’s capital structure. The infusion of cash is good for the long-term outlook of the company, and thus, is also good for its shares.

Non-Diluted Follow-on Offering

The other type of follow-on public offer is non-dilutive. This approach is useful when directors or substantial shareholders sell off privately held shares. Cash proceeds from non-diluted sales go directly to the 澳洲幸运5官方开奖结果体彩网:shareholders placing the stock into the open market.

In many cases, these shareholders are company founders, members of the board of directors, or pre-IPO investors. Since no new shares are issued, the company’s EPS remains unchanged. Non-diluted fo✃llow-on offerings are also called secondary market offerings.

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 pric𓆉e.

Follow-on Public Offerings (FPOs) in the Market

Follow-on offerings are common in the investment world. They provide an easy way for companies to raise equity that can be used for common purposes. 澳🐭洲幸运5官方开奖结果体彩网:Companies announcing secondary offeringꩲs may see their share price fall as a result. Shareholders often react negatively to secondary offerings because 🧸they dilute existing shares, and many are introduced below market prices.

Some companies that have completed follow-on public offerings in 2024 include Longboard Pharmaceuticals, with an issuance of 10 million shares valued at $210 million, and Cyngn, with an issuance of 12.42 million shares valued at about $20 million.

The Bottom Line

An FPO is typically done when the company wants to fund new ♊projects or expansions, pay off debt, or increase its working capital. There are two main types of FPOs, dilutive and non-dilutive. The shares are offered at a fixed price to the public through a book-building process, with the proceeds going directly to the company.

Existing shareholders may also participate in the FPO; either by purchasing additional shares or selling some ꦗof their existing ones. FPOs are a way for companies to tap into the capital markets and raise additional funds without taking on debt.