Open Offer: A Way for Companies to Raise Money by Selling New Shares to Existing Shareholders

An open offer is a method that companies use to raise new capital by offering additional shares to their current shareholders.
These new shares are usually offered at a discounted price to encourage participation and reward existing investors.

In simple terms, an open offer gives current shareholders the first chance to buy new shares directly from the company, before they are offered to anyone else.

Core Idea

When a company needs more funds — for example, to expand its business, reduce debt, or strengthen its finances — it may decide to issue new shares.
Through an open offer, those new shares are offered to existing shareholders in proportion to how many shares they already own.

The offer usually remains open for a specific period, and shareholders can choose whether or not to take part.
If they do, they invest more money and increase their ownership in the company.
If they don’t, their percentage ownership may fall slightly because more shares are issued overall.

In Simple Terms

If you already own shares in a company, an open offer gives you a special opportunity to buy more shares at a lower price, before the general public can.

Example

Imagine you own 1,000 shares in a company.
The company announces an open offer where shareholders can buy 1 new share for every 5 shares they hold, at £4 per share, while the current market price is £5.

You can choose to:

Buy 200 new shares for £4 each, investing £800 in total.

Or do nothing, in which case your ownership percentage will decrease slightly because more shares will exist once the offer ends.

The company uses the money raised from shareholders to fund new projects or strengthen its balance sheet.

Real-Life Application

Companies use open offers to:

Raise additional capital without turning to outside investors.

Reward loyal shareholders by giving them early access to discounted shares.

Improve financial stability, for example by paying down debt or financing growth.

Shareholders often see open offers as a sign that the company wants to involve its existing investors in future growth rather than rely on external funding.

Process Overview

Announcement: The company announces the open offer and sets the price, ratio, and timeline.

Offer Period: Shareholders receive an invitation to buy more shares within a fixed time frame (usually a few weeks).

Decision: Shareholders can accept the offer and pay for their shares or choose not to participate.

Allocation: After the offer closes, new shares are issued to those who took part, and trading continues as normal.

Common Misconceptions and Mistakes

“An open offer is mandatory.” Participation is optional — investors can accept or decline.

“It guarantees a profit.” Even though shares are discounted, market prices can drop before allocation.

“Only large investors can join.” Any registered shareholder can participate within the offer period.

“It means the company is in trouble.” Not always — it can also signal growth plans or restructuring.

Related Queries Investors Often Search For

What does an open offer mean for shareholders?

How do I participate in an open offer?

Are open offer shares always discounted?

What happens if I ignore an open offer?

Why do companies prefer open offers for raising funds?

Summary

An open offer is a fundraising method where a company invites its existing shareholders to buy new shares, typically at a discounted price.
It allows shareholders to increase their investment and helps the company raise money for projects, debt reduction, or expansion.
Participation is voluntary, and shareholders who choose not to take part may see their ownership percentage slightly reduced once new shares are issued.