Follow On Offering | FOO

 

What is FOO: FOO is when a company issues or sells either new stocks or coming from a stock holder/s and are offered to the public.

Why do companies exercise FOO? Technically they do a FOO when:

  1. A company wants to raise additional capital after going through IPO by creating new sahres and selling it to the public or
  2. An investor / owner wants to sell their stake or stocks

What is the Effect of FOO:

  1. Gain additional capital without raising debt from selling additional shares
  2. Increasing publicly held shares if the seller is from the owners or institutional seller.
  3. The value of of stock diminishes if the sale from newly created shares

Sample:

Value of Company: Php 40,000,000

The company owns 10,000,000 shares

Value per share: Php 4

NOW AFTER FOO

Newly created shares: 400,000

Total Current Shares: 10,400,000

Current total value per share: Php 3.85

Other thing to consider is that FOO are usually offered at a discount so a possibility of you gaining is good but then again practice caution as we can never really tell where the market or a specific stock is going.