My research indicates that while certainly not the norm, there is precedent for companies to set follow-on stock offering prices at a premium to the share price.
Why Would a Company Choose to Sell the New Shares at a Premium?
Sometimes, a follow-on may be priced at a premium because the company received indications of interest, or reservations, from large institutional investors at a set price that is actually a premium from current market value. One website states:
"Often, the follow-on provides a way for institutional investors to buy large amounts of that company’s stock in one transaction--which may not be possible if there are not many shares trading publicly. Large investors might not mind buying the stock at a premium because they are less interested in the day-to-day price fluctuations but more focused on owning many shares of that company."
https://www.loyal3.com/new-to-investing/follow-on-offerings/how-does-follow-on-offering-pricing-work
I also found this step-by-step of the process (for both IPO and follow-on offering) handy:
Follow-On Offering Filing and Pricing Timeline
An illustrative follow-on offering filing and pricing timeline looks like this:
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Step One:First, the company will register its follow-on with the SEC, similar to an IPO. This filing will customarily include a preliminary prospectus, which will list the last closing price of its public stock and other important information.
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Step Two:After the company files its follow-on, the roadshow will begin. Similar to the IPO process, company’s management and banks may meet with investors to try to determine demand for the offering, and take reservations. During the roadshow, the company’s stock will continue to trade in the public market, and it is common for the price to fluctuate during the roadshow. The roadshow period may be shorter than for the IPO, and the offering may proceed to pricing quickly.
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Step Three:After the roadshow ends, the company and underwriters will set the final Offer Price, typically after the market closes. This final price can either be at a modest discount from the price disclosed in the prospectus or recent closing market price, or a higher, premium price, based on the demand generated during the roadshow. It is also possible for the final price to be the same as the closing market price.
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Step Four:After the follow-on Offer Price is set, stock will be allocated to investors before the market opens the next morning.
By the way, I have not received any response from IR on my last 3 emails. I requested that my commments be brought directly to management, as a sign of respect for the many years (and now multiple IR firms) that we long-standing shareholders have suffered through.
Cheers,
lebowski101
