A follow-on public offering (FPO) is when a firm that is publicly traded issues shares to investors. After an initial public offering, a firm may issue more shares in a follow-on offering (IPO). Secondary offerings are sometimes known as follow-on offerings. A public company can also benefit from an FPO by submitting an offer document. IPOs, or initial public offerings of stock to the general public, are not to be confused with FPOs. FPOs are secondary issues issued after a business is listed on a stock market. There are two sorts of public follow-on offers. The first is dilutive to shareholders, since the company’s Board of Directors agrees to raise the share float, or the number of shares available. This type of follow-on public offering aims to raise funds to pay down debt or grow the company, resulting in an increase in the number of outstanding shares. Non-dilutive follow-on public offers are the other type. When directors or significant shareholders sell-off privately owned shares, this method is beneficial.
A follow-on public offer is made by an issuer that has already made an IPO in the past and now makes a further issue of securities to the public. When a company wants additional capital for growth or to redo its capital structure by retiring debt, it raises equity capital through a fresh issue of capital in a follow-on public offer.
A follow-on public offer may also be through an offer for sale. This usually happens when it is necessary to increase the public shareholding to meet the requirements laid down in the listing agreement between the company and the stock exchange. Or promoters may dilute their holdings in the company after the lock-in imposed at the time of the IPO is over.