SIE (Securities Industry Essentials) Practice Exam

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What is a follow-on offering in the context of common stock issuance?

An offering of shares only to institutional investors after the IPO
A reissuance of treasury shares to the public
An offering of new shares other than the initial public offering (IPO)
A private sale of existing shares directly from the current shareholders

The correct answer is: An offering of new shares other than the initial public offering (IPO)

A This answer is incorrect because a follow-on offering can be made to both institutional investors and the general public. B: This answer is incorrect because a follow-on offering involves the issuance of new shares, not the reissuance of existing shares. D: This answer is incorrect because a follow-on offering is made directly by the company, not by existing shareholders. Overall, a follow-on offering is a way for a company to raise additional funds by issuing new shares to the public after the initial public offering (IPO). It is different from an IPO, which is the first time a company offers its shares to the public. It is also different from a secondary offering, which involves the sale of existing shares from current shareholders.