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:
- A company wants to raise additional capital after going through IPO by creating new sahres and selling it to the public or
- An investor / owner wants to sell their stake or stocks
What is the Effect of FOO:
- Gain additional capital without raising debt from selling additional shares
- Increasing publicly held shares if the seller is from the owners or institutional seller.
- The value of of stock diminishes if the sale from newly created shares
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.