Follow-on offering.
In plain English
A follow-on offering is any registered stock sale by a company that has already gone public. When the company issues new shares, it receives the proceeds and the share count rises, so each existing share represents a slightly smaller claim on the business. Companies do this to fund expansion, repay debt, or shore up a balance sheet. Offerings are often priced slightly below the market to attract buyers, which can pressure the stock on announcement. The registration statement discloses the use of proceeds, which is the most informative part for existing holders.
01Why it matters
New shares divide the same company among more owners, so the question is always whether what the cash buys is worth more than the slice of ownership it costs you.
02The math, step by step
A company with 100 million shares issues 10 million new shares at $28, raising $280 million. Existing holders now own 100 million of 110 million shares, so their claim on the business drops from 100 percent to about 91 percent.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
An initial public offering is the first sale of stock to the public and creates the listing. A follow-on comes afterward, when the stock already trades and a market price exists. The pricing process is very different because one has a reference price and the other does not.
04Receipts
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Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice