Understanding Follow-On Offerings: A Guide for Investors

Follow-on refers to a subsequent offering of securities by a company after an initial public offering (IPO) or other previous offerings. It is typically used to raise additional capital for the company, expand its operations, or repay debt. The term "follow-on" is often used interchangeably with "secondary offering," although there are some subtle differences between the two terms.

In a follow-on offering, the company may sell new shares of stock to investors, or it may offer existing shares held by existing shareholders, such as institutional investors or company insiders. The proceeds from a follow-on offering can be used for a variety of purposes, including funding new business initiatives, expanding into new markets, or paying off debt.

Follow-on offerings are common among publicly traded companies, particularly those that have experienced significant growth and need to raise additional capital to finance their ongoing operations. They can also be used as a way for existing shareholders to sell some of their holdings in the company, providing liquidity and potentially generating a profit.