10.18What is an OFS (Offer for Sale)?
1What is it?
In an OFS, existing shareholders (promoters, private equity, VCs) sell their shares. The money goes to them, not to the company.
2Why does it exist?
It gives early investors an exit. A large OFS isn’t automatically bad, but ask why insiders are selling.
3Diagram
Fresh issue
New shares created. Money goes to the company.
Offer for sale (OFS)
Existing shares sold. Money goes to sellers.
4Quick revision
- Existing holders sell.
- Company gets no money.
- Ask why insiders sell.
5Knowledge check
Q1. In an OFS, who gets the money?Show answer
The selling shareholders.
Q2. Does an OFS dilute existing shareholders?Show answer
No, no new shares are created.
Q3. Why might a VC sell in an OFS?Show answer
To exit and return money to its own investors.