Definition of Add on offering

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.

Example

• The company Tesla has continuously tapped the financial markets to fund newer projects while raising billions of dollars through their multiple offerings.