IPO and FPO sound like brothers, don’t they? But are they really connected??
Well, maybe… or one can be the successor of the other.
Find out more below!
Content:
What is IPO in the Share Market?
IPO stands for Initial Public Offering. It is a process where a company decides to raise funds from the public by selling its shares.
The shares are first issued in the primary market via IPO then moved to the secondary market where it is traded among the public. The secondary market is also known as the After Issue Market.
To learn about IPO in detail, click on this link!
What is FPO in the Share Market?
FPO stands for Follow on Public Offer. As the name suggests, FPO is a follow-up process where the company offers shares to raise additional funds after the IPO.
To learn about FPO in detail, click on this link!
Types of FPO
Dilutive Offering
In this type of offering, the company decides to add shares or increase the number of shares that are offered to the public. In the dilutive offering, the value of the company remains the same but the liquidity of the shares increases. Also, the earnings per share (EPS) decreases.
Non-Dilutive Offering
This process takes place when the majority shareholders of the company like the founder, directors, etc. decide to sell their shares to the public. The company doesn’t benefit from this type of offering as the money from the shares sold belongs to the corresponding majority shareholders. Here the earnings per share (EPS) remains the same as no new shares are issued.
FPO vs IPO
| FPO | IPO | |
| Definition | The company decides to issue its shares at the stock market to raise the funds as a follow-up process after IPO. | IPO is the process when a company issues the shares for the first time. |
| Risk Factor | Lower risk. | Higher risk in comparison with FPO. |
| Price | The FPO issue price is lower than the existing market price. | The IPO issue price can be fixed or decided based on the book-building process. |
| Company Type | Listed Company. | Private Company. |
| Types | Dilutive offering-Dilutive offering | Fixed price issue book building issue |
Quick Summary
- IPO stands for Initial Public Offering. It is a process where a company decides to raise funds from the public by selling its shares.
- The shares are first issued in the primary market via IPO and then moved to the secondary market where it is traded by the public. The secondary market is also known as the After Issue Market.
- FPO stands for Follow on Public Offer. As the name suggests, FPO is a follow-up process where the company offers shares to raise additional funds after the IPO. There are two types of FPO;
- Dilutive offerings and
- Non Dilutive offerings.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, and hence we bring you the important topics and areas that you should know:
| Market | What is Primary Market? |
| Bull vs Bear Market | |
| Trading | What is Online Trading? |
| What is Algo Trading? | |
| Investment | What is Bonus Share? |
| What is Valuation of Shares? | |
| What is Corporate Action? | |
| Analysis | Stock Market Analysis |
| Individual Topics | What are CTT & STT Charges? |
| India Vix | |
| Difference between FDI and FII | |
| Account | What is Trading Account |
| What is Demat Account |
