Add-On

AAA

DEFINITION of 'Add-On '

Additional shares put on the market by a company that has already gone public. Reasons why a company might use add-on financing include raising cash to fund existing operations, expanding operations or paying for a new project. While an add-on is useful for raising money, it can cause the company's share price to decline, and current shareholders to be diluted.

INVESTOPEDIA EXPLAINS 'Add-On '

From the existing shareholders' perspective, the issuance of add-on stock is a bad thing because it usually reduces the value of the stock they own. More shares mean that existing shareholders will see their percentage of ownership in the company decrease. They may also see the stock's earnings per share decline. However, if the add-on is able to increase earnings and shareholder value in the long-term, it will generally be viewed as a positive decision.

RELATED TERMS
  1. Subsequent Offering

    An offering of additional shares after the issuing company has ...
  2. Impact Day

    The date on which a corporation makes a secondary offering of ...
  3. Public Offering

    The sale of equity shares or other financial instruments by an ...
  4. Secondary Offering

    1. The issuance of new stock for public sale from a company that ...
  5. Initial Public Offering - IPO

    The first sale of stock by a private company to the public. IPOs ...
  6. Offering

    The issue or sale of a security by a company. It is often used ...
RELATED FAQS
  1. In an IPO, who is a greensheet distributed to and for what purpose?

    One of the most talked about documents that arises in the process of introducing a new issue is the greensheet. This is an ...
  2. Are IPOs available to short sell immediately upon trading, or is there a time limit ...

    The quick answer to this question is that an IPO can be shorted upon initial trading, but it is not an easy thing to do at ...
  3. How does an IPO get valued? What are some good methods for analyzing IPOs?

    The price of a financial asset traded on the market is set by the forces of supply and demand. Newly issued stocks are no ...
Related Articles
  1. Mutual Funds & ETFs

    Investing In IPO ETFs

    Learn the history, rules and risks of investing in IPO exchange-traded funds.
  2. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  3. Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  4. Options & Futures

    Greenshoe Options: An IPO's Best Friend

    Find out how companies can save or boost their public offering price with these options.
  5. Investing Basics

    Understanding Risk Averse Investing

    Risk averse describes a low level of risk an investor is willing to accept on his investments. An investor who is risk averse prefers little risk and is willing to accept a lower return because ...
  6. Investing Basics

    What is Profit?

    Profit is a general term used to denote when earnings exceed the expenses incurred to generate those earnings.
  7. Investing Basics

    What's a Closed-End Fund?

    A closed-end fund is a mutual fund that has an initial offering (IPO) of shares, and once those shares are sold, no additional shares are issued. Since it is a public offering, closed-end funds ...
  8. Investing News

    Millennial Investing Techniques Are Changing The Game

    Millennials are taking advantage of social media and a variety of high-tech tools to plow their wealth into investment vehicles of their choice.
  9. Investing

    Is Caterpillar Here To Stay?

    Because Caterpillar is the largest construction and mining equipment manufacturer in the world, investors can count on it to keep paying dividends.
  10. Investing

    Is J.C. Penney Fighting An Uphill Battle?

    J.C. Penney's revenue is once again on the ascent, its free cash flow is closing in on positive territory, and its gross margin has rebounded sharply.

You May Also Like

Hot Definitions
  1. Technical Skills

    1. The knowledge and abilities needed to accomplish mathematical, engineering, scientific or computer-related duties, as ...
  2. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  3. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  4. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  5. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  6. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
Trading Center