Don’t IPO and FPO seem like they might be brothers? But do they actually relate to one another? Well, perhaps, one may succeed the other.
Keep reading to learn more!
What is IPO in the Share Market?
IPO is an abbreviation for Initial Public Offering. It is the procedure through which a company decides to obtain capital from the general public by selling its stock.
The shares are initially issued in the primary market through an IPO and then transferred to the secondary market, where they are exchanged between the general public. The After Issue Market is another name for the secondary market.
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What is FPO in the Share Market?
When a publicly traded corporation issues new shares to investors, this is known as a follow-on public offering (FPO). After an IPO, a firm may decide to issue more shares to the public in what is called a “follow-on public offering” (FPO). Subsequent public offerings go by both names, “secondary” and “follow-on.”
Types of FPO
Dilutive Offering
In this form of public offering, the corporation decides to raise the number of shares available to the public. In the dilutive issue, the company’s value stays unchanged, but the liquidity of the shares rises. Additionally, earnings per share (EPS) decline.
Non-Dilutive Offering
This procedure occurs when the majority of investors of the firm, like the founder, directors, etc., decide to sell their shares to the public. The firm gains nothing from this sort of offering since the earnings from the sale of shares go to the corresponding shareholders. Because no new shares are issued, the earnings per share (EPS) remains unchanged.
FPO vs IPO
| FPO | IPO | |
| Definition | As a follow-up to the IPO, the company plans to sell its equity on the stock exchange in order to obtain capital. | The procedure through which a company initially issues shares is known as an IPO. |
| Risk Factor | Lower risk. | Riskier than FPO. |
| Price | The issue price for the FPO is less than the current market value. | The issue price of an IPO could be set or determined based on the book-building process. |
| Company Type | Listed Company. | Private Company. |
| Types | Dilutive offeringNon-Dilutive offering | Fixed price issueBook building issue |
Quick Summary
- IPO is an abbreviation for Initial Public Offering. It is the procedure through which a company decides to obtain capital from the general public by selling its stock.
- The shares are initially issued in the primary market through an IPO and then transferred to the secondary market, where they are exchanged between the general public. The After Issue Market is another name for the secondary market.
- When a publicly traded corporation issues new shares to investors, this is known as a follow-on public offering (FPO). After an IPO, a firm may decide to issue more shares to the public in what is called a “follow-on public offering” (FPO). There are two types of FPO;
- Dilutive offerings and
- Non-Dilutive offerings
