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!
Types of FPO
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.
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
|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.|