Follow-On Offering

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DEFINITION of 'Follow-On Offering'

An issue of shares of stock that comes after a company has already issued an initial public offering (IPO). A follow-on offering can be diluted, meaning that the new shares will lower a company's earnings per share (EPS), or undiluted, if the additional shares are preferred. A company looking to offer additional shares, registers the offering with regulators which includes a prospectus of the investment.




BREAKING DOWN 'Follow-On Offering'

Unlike an IPO, which includes a price range that the company is looking to sell shares at, the price of a follow-on offering is market-driven. Because the company is already publicly traded, it has been consistently valued by investors for at least a year before the follow-on offering is floated. Thus, any investment bank working on the offering will often focus on marketing efforts, rather than valuation.

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