Add on offering
Updated on March 12, 2023
The process by which a company can issue its shares again to the public for raising funds is called Add on Offering or Add on offer. It is also known as a Follow on Public Offer (FPO).
Why is Add on offering used?
The purpose of ‘Add on Offering’ is generally to raise additional funds or bring a change to the ownership structure.Companies may also use it to reduce debt
or increase the number of outstanding shares.
Types of Add on Offerings
As per the ownership structure, there are two types of Add on Offerings :
1. Diluted – In this case, the company issues additional shares. This results in an increase in the company’s number of shares outstanding. This also means that there will be a reduction in the company’s Earning per Share (EPS).
2. Non-diluted – Here, new or additional shares are not issued but only those shares which are held by big shareholders, directors, founders etc are offered to the public. This is generally carried out for changing the ownership structure of the company. The proceeds of this goes to these shareholders and there is no impact on the EPS.
Benefits of investing in Add on Offering
Investors looking to participate in an Add on Offering have the following benefits :
a. The company is known with financials, results and other details in public domain
b. Prices offered in Add on Offering are lower than the market price
c. Like an IPO, Add on Offering is open to all