Financial Industry Regulatory Authority (FINRA) Practice Exam 2025 - Free FINRA Practice Questions and Study Guide

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What describes a follow-on offering?

An initial public offering with new shares

A new issue of shares by a previously public company

A follow-on offering refers to a new issue of shares by a company that has already gone public. This typically occurs when a company seeks additional capital beyond what it has raised during its initial public offering (IPO). By issuing new shares, the company can attract more investment, which can be used for various purposes such as funding expansion, paying down debt, or pursuing new projects.

In this context, the follow-on offering enhances the company's ability to raise funds while also allowing existing investors to further invest in their holdings. Unlike the options that suggest concepts such as initial public offerings, rights offerings, or employee-specific offerings, a follow-on offering is focused solely on a company that is already publicly traded and is looking to expand its market capitalization through additional equity financing.

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Common stock issued with a rights offering

An offering specifically for employees of the company

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