What is the initial step in a marketed follow-on offering?

In a marketed follow-on offering, the initial step involves the company setting a price range for the shares. This pricing range serves as a guide for potential investors and is a crucial part of the process as it helps to gauge market interest and assess the demand for the shares being offered. Setting an appropriate range is important because it balances the need for the company to raise capital with the desire to achieve a favorable reception from the market. This technique allows underwriters and the company to refine the final pricing based on investor feedback leading up to the offering.

Following this, the underwriters then work on marketing the offering to institutional investors and other market participants based on the established price range. The range will guide their discussions and efforts to create interest and ultimately lead to a successful follow-on offering. This sequence is essential, as it lays the foundation for subsequent steps like finalizing the offering price, placing shares with investors, and ensuring effective capital raising for the company.