What Is a Subsequent Offering?

The term subsequent offering refers to the issuance of additional stock shares after a company has already gone public through an initial public offering (IPO). Subsequent offerings are, thus, made by companies that are already publicly traded or by an existing shareholder. These offerings are commonly made on a stock exchange through the 澳洲幸运5开奖号码历史查询:secondary market, especially when they're offered to the general public. They are commonly used to raise capital or to boost their 澳洲幸运5开奖号码历史查询:cash reserves. As such, they may take o🅺n the form of dilutive or non-dilutive offerings.

How a Subsequent Offering Works

When a business wants to make the transition from a 澳洲幸运5开奖号码历史查询:private to a public company, it advertises its intention to raise capital by issuing shares through an initial public offering. The company enlists the aid of one or more banks to act as 澳洲幸运5开奖号码历史查询:underwriters to price the shares, market, and advertise the offering. Once prepared, the company goes public and sells shares to institutional and other large investors on the 澳洲幸运5开奖号码历史查询:primary market. Sha🐻res then start trading on the secondary market to the general public.

Subsequent offerings take place after a company has already gone public. These offerings are also known as 澳洲幸运5开奖号码历史查询:follow-on offerings or follow-on public offerings (FPOs). In some cases, they may also be called 澳洲幸运5开奖号码历史查询:secondary offerings. Rather than being priced by underwrit♏ers, the prices for subsequent offerings are normally driven by the market.

As noted earlier, this type of offering can be initiated by the company itself, which means the company decides to issue new shares on the market. In other circumstances, an existing 澳洲幸运5开奖号码历史查询:shareholder, such as someone from the compa💙ny's management or theℱ company's founder, may decide to sell their shares on the market by issuing a subsequent offering.

No two subsequent offerings are ever the same. These offerings come in two different types: Dilutive and non-dilutive. And the reasons for taking this step vary on a number of factors, including raising new capital, boosting cash reserves, or increasing value for the company's existing shareholders.

Special Considerations

Subsequent or follow-on offerings may or may not be a cause for concern for existing shareholders. That's why investors should take note of what subsequent offerings mean to them and how they affect their 澳洲幸运5开奖号码历史查询:investments. The first thing is to determine whet𒆙her it's a dilutive or a non-dilutive offer, and who is making the shares available.

Dilutive offerings mean new shares are issued, which means there's a very good chance an investor's holdings in the company will be diluted. If this is the case, investors should decide whether the offer price is in line with the company's value.

If an existing shareholder is unloading their holdings, finding out the position of the shareholder can provide investors with valuable insight. Sometimes these insiders are privy to information other shareholders can't access. So if the founder or 澳洲幸运5开奖号码历史查询:chief executive officer 🐟(CEO) is unloading a lot of shares, something may be up.

Types of Subsequent Offerings

As mentioned above, 🍰a subsequent offering canꦛ be either dilutive or non-dilutive.

Dilutive Subsequent Offering

In a dilutive subsequent offering, new shares of stock aღre created by the issuing company. The creation of these shares increases the total number of shares outstanding. As a result, issuing these shares dilutes earnings on a per-share basis.

A company may go to market with a dilutive subsequent offering in order to raise capital for various opportunities, such as funding new operations or projects, paying off debt, or continu✤ing with its growth plans. Another reason why a company may take this route is to boost its cash reserves so it stays at the same debt-to-value ratio.

Non-Dilutive Subsequent Offering

In a non-dilutive subsequent offering, privately held shares of the company, which are shares held by the company's founders, directors, or other insiders, are offered for sale to the public. Because no new shares of the company's stock are created, earnings are not diluted on a 澳洲幸运5开奖号码历史查询:per-share basis.

In this type of subsequent offering, insiders often want to take advantage of the high demand for company shares so they can diversify personal or business holdings or lock-in gains on their investment. Initial shareholders may decide to issue a subsequent offering after satisfying a required 澳洲幸运5开奖号码历史查询:holding period after the IPO.

Real-World Example

Meta (META), formerly Facebook, announced a subsequent offering of 70 million shares in 2013. This offering consisted of more than 27 million shares offered by the company and almost 43 million by existing shareholders, which included more than 41 million shares by 澳洲幸运5开奖号码历史查询:Mark Zuckerberg. The company said it was using the capital for "working capital and other general corporate purposes." The proceeds from the sale of Zuckerberg's shares were used to pay off his tax liabilities.