Follow-On Offering
Definition
A follow-on (or secondary) offering is a sale of stock by a company that is already public. It can be primary (new shares issued, proceeds to the company — dilutive to existing holders), secondary (existing shareholders selling, no new shares, no proceeds to the company), or a mix.
Execution formats range from fully marketed deals with a roadshow, to accelerated bookbuilds done overnight, to bought deals where the bank purchases the entire block itself and takes resale risk. Because the stock already trades, follow-ons price off the market — typically at a modest discount to the last close (the 'file-to-offer' discount) — and often trigger a short-lived price decline on announcement due to supply and signaling.
Seasoned issuers frequently use a shelf registration to execute follow-ons quickly.
Why interviewers ask
Interviewers use follow-ons to test whether you distinguish primary vs secondary shares and understand dilution and signaling ('why does the stock usually fall when a follow-on is announced?'). ECM candidates should also know the execution spectrum — marketed deal vs accelerated bookbuild vs bought deal — and the risk each carries for the bank.
Related terms
Interviews don't test definitions — they test recall under pressure.
Drill 1,500+ real questions with spaced repetition. Free to start — 10 reps a day on the house.