A forward sale agreement fixes the terms of a sale now while the delivery and payment happen later. In a common equity version, a company arranges with a bank for a share offering. The bank borrows shares from existing holders and sells them to investors immediately. The company delivers shares to the bank at a later date, within an agreed period, and receives cash at a price set in the contract, adjusted for items such as a daily interest charge and dividends.
The company gets price certainty and can wait to receive and use the money until it needs it, for example when a project is ready. The shares are not issued until settlement, so dilution is delayed. Until then, accounting rules may require the potential extra shares to be counted in diluted earnings per share.
Settlement can be physical, with shares exchanged for cash, or in cash or net shares, depending on the contract. The risks include a falling share price and counterparty risk.
Read the settlement options, the expected timing and how the agreement is treated in the share count and financial statements.