Add-On

Whatever.com is already public. It sold twenty-million shares at $15/pop, and now has 120 million shares outstanding.

For better or worse, the company burned through the cash it raised quickly. What? Corporate jets are expensive. And now it wants to raise more money, so it begins to go through the efforts of an add-on offering, more commonly known as a secondary offering. More shares dilute the company, so while it earned a $120 million last year, or a dollar a share, if it sells another 30 million shares to the public, raising cash, and then having a 150 million shares outstanding...if the company produces another $120 million earnings year, it will have only earned a 120 million divided by 150 million, or $0.80 a share. A big come-down from the buck a share they earned before.

So add-ons are great when the money is well-spent. And that whole corporate jet thing really was probably not the way to go.