An add-on offering refers to the additional shares made available to the public by a publicly trading company. This is usually done to raise capital for already existing operations, expansion of trades or to fund new upcoming projects.
It is also known as Follow-on Public Offer (FPO) in the Indian markets. The company may additionally raise money through Right Issue. A Right Issue enables an already existing publicly trading company to issue more shares on the market to raise money.
Points to remember:
While add-on offerings do raise money, they tend to frustrate shareholders since it can reduce the stock prices and change ownership.
Add on shares usually, benefit the company for the long term by lifting earnings and creating greater profits.
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