What is a follow-on offering?

A follow-on offering is indeed defined as a subsequent issuance of equity shares after a company has already gone public. This type of offering occurs when a company issues additional shares to the public, typically to raise more capital after its initial public offering (IPO).

Follow-on offerings can serve various purposes, such as funding expansions, paying down debt, or financing acquisitions. Because the company is already publicly traded, existing shareholders may experience dilution in their ownership percentage if new shares are issued without their participation. This option is important in the context of capital markets, as it allows companies to access funds from equity markets even after they have transitioned from private to public ownership.

The other choices describe different financial activities. A private sale of stock to company insiders refers to a transaction between a company and select individuals, which is different from public offerings. A public auction of shares before a company goes public does not align with the concept of a follow-on offering, as it pertains to the IPO process itself. Lastly, a new venture capital investment in a startup is a different financial mechanism entirely, targeting private companies at the growth stage rather than public companies conducting follow-on offerings.