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Jan Strandberg is the Founder and CEO of Acquire.Fi. He brings over a decade of experience scaling high-growth ventures in fintech and crypto.
Before founding Acquire.Fi, Jan was Co-Founder of YIELD App and the Head of Marketing at Paxful, where he played a central role in the business’s growth and profitability. Jan's strategic vision and sharp instinct for what drives sustainable growth in emerging markets have defined his career and turned early-stage platforms into category leaders.
Follow-on Public Offer (FPO)
A Follow-on Public Offer is a public sale of additional shares by a company that is already listed on a stock exchange. It allows an existing public company to raise fresh capital from investors after its initial listing. Because the company already has a trading price and an established investor base, the pricing process is faster and the regulatory burden is lower than an initial public offering. New shares are sold at a discount to the current market price to compensate buyers for the dilution they will experience.
Two Types of Follow-on Offers Serve Different Goals
The structure determines who receives the proceeds. This distinction matters whether you are a company raising capital or an investor deciding whether to participate.
- Dilutive Follow-on Offer: Your company issues new shares and receives the proceeds directly. Capital flows into the business to fund expansion, retire debt, or build cash reserves. Existing shareholders experience dilution because the total share count increases.
- Non-dilutive Follow-on Offer: Existing shareholders such as founders or private equity investors sell their own shares to the public. Your company receives no new capital. Proceeds go entirely to the selling shareholders. The share count stays unchanged.
When a Follow-on Offer Makes More Sense Than Other Funding Options
Companies reaching for capital can choose from a Follow-on Offer, a rights issue, a private placement, or bank borrowing. Each option involves different cost, speed, and dilution trade-offs.
A Follow-on Offer suits situations where you want to broaden your shareholder base, increase public float, or raise large sums without negotiating individually with each investor. A rights issue gives existing shareholders the first chance to buy new shares, preserving their proportional ownership. A Follow-on Offer does not extend that preference, which makes it more immediately dilutive to current holders but faster and simpler to execute at scale.
How the Offer Price Is Set
Investment banks managing the transaction run a book-building process where institutional investors submit bids at various price levels during the subscription window. The final price is typically set at a 5% to 10% discount to the prevailing market price to ensure sufficient demand and guarantee the offering is fully subscribed.
A wider discount signals weak demand or an issuer that needs to work harder to attract buyers. A tight discount signals strong investor confidence in the business.
Follow-on Offer vs. IPO
| Follow-on Public Offer | IPO | |
|---|---|---|
| Company Status | Already publicly listed | Going public for the first time |
| Price Reference | Discount to existing market price | Determined through full book-building from scratch |
| Investor Familiarity | High; company has a trading history and prior filings | Low; investors rely primarily on the prospectus |
| Cost and Complexity | Lower; existing disclosure infrastructure is already in place | Higher; full regulatory review from baseline |
Sources
- https://www.sec.gov/cgi-bin/browse-edgar
- https://www.sebi.gov.in/legal/regulations/jun-2021/securities-and-exchange-board-of-india-issue-of-capital-and-disclosure-requirements-regulations-2018_50096.html
About the Author
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