Follow-On Offerings in Australia: Investor Guide 2025

In 2025, follow-on offerings (FOOs) are drawing renewed attention as Australian companies seek to tap capital markets amid ongoing economic turbulence and shifting regulatory landscapes. Whether you’re a seasoned investor or new to the ASX, understanding how FOOs work—and how they could affect your portfolio—is crucial.

What Is a Follow-On Offering?

A follow-on offering, also called a secondary offering, is when a publicly listed company issues additional shares after its initial public offering (IPO). The goal? To raise more capital for growth, acquisitions, debt reduction, or simply to shore up the balance sheet. Unlike an IPO, which puts a company on the ASX for the first time, a follow-on offering leverages its existing market presence.

There are two main types:

• Primary follow-on: The company itself issues new shares to raise funds for corporate needs.

• Secondary follow-on: Existing shareholders (like early investors or founders) sell some of their stakes, with proceeds going to them, not the company.

In Australia, most FOOs in 2025 are primary, as companies look to capitalise on resilient investor demand despite global uncertainty.

Why Are Follow-On Offerings Trending in 2025?

Several forces are driving the popularity of FOOs this year:

• Interest Rate Environment: The RBA’s cautious rate cuts in early 2025 have encouraged companies to access equity markets rather than take on more debt.

• ASX Sector Rotation: With sectors like renewables, AI, and healthcare booming, listed companies are racing to fund expansion projects or new tech deployments.

• Regulatory Updates: ASIC’s 2025 enhancements to disclosure requirements have improved transparency for retail investors, making FOOs more accessible and less risky.

For example, in March 2025, a leading Australian lithium miner completed a $600 million follow-on offering to accelerate its WA expansion—attracting strong demand from institutional and retail investors alike.

How Do Follow-On Offerings Affect Investors?

Participating in a follow-on offering can be a double-edged sword. Here’s what to consider:

• Dilution Risk: New shares increase the total share count, which can dilute existing shareholders’ ownership and earnings per share. However, if the capital is well deployed, long-term value can rise.

• Pricing Dynamics: FOOs are typically priced at a discount to the current market price to entice participation. This can temporarily pressure share prices, but often rebounds if the capital is put to productive use.

• Access: Thanks to 2025’s regulatory tweaks, retail investors now enjoy better access to many FOOs that were once the domain of institutions.

Consider the example of a major ASX healthcare company’s April 2025 offering, where shares were priced 8% below the previous close. The stock dipped initially but recovered within weeks as investors digested the company’s robust expansion plan.

What Should Investors Watch Out For?

Before diving into a follow-on offering, savvy investors should:

• Scrutinise the use of proceeds: Is the capital earmarked for growth, debt repayment, or plugging holes?

• Evaluate management’s track record: Has the company delivered on past promises?

• Check for lock-up periods or insider selling: Large insider sales may signal waning confidence.

• Review prospectus and ASX announcements for full details on pricing, timing, and allocation.

FOOs can offer attractive entry points, especially when the company is on a solid growth trajectory. But always weigh the dilution and short-term volatility against the long-term strategy.

The Bottom Line

Follow-on offerings are a sign of a vibrant, evolving market—and in 2025, they’re more accessible and transparent than ever for Australian investors. With solid due diligence and an eye on the company’s strategic direction, FOOs can be an opportunity rather than a risk.