Follow-on offerings are any public offerings conducted after a company has gone public through an initial public offering (IPO). Also sometimes referred to as “follow-on public offer” or “FPO.”
Companies generally conduct follow-on offerings because they need capital beyond that raised by their IPO. Follow-on offerings are generally conducted as shelf offerings. Follow-on offerings may also occur as secondary offerings if existing shareholders seek to sell their shares to the public.
Follow-on offerings can be dilutive or non-dilutive. If the offering increases the number of shares outstanding, then the offering is dilutive because each share is entitled to a lower relative portion of the company’s earnings. If the company offers shares it holds, or in the case of a secondary offering, then the offering is non-dilutive because the number of shares outstanding does not increase.
[Last updated in January of 2022 by the Wex Definitions Team]