FPO stands for follow on public offer. A company goes for FPO when it needs to raise additional funds after it has been listed in the stock market. The company can opt for FPO due to multiple reasons.
What are those reasons ?? Let’s find out !!!
FPO in the share market is the process by which a publicly listed company dilutes its shares or issues new shares to the investors. A company opts for FPO when it wants to raise capital by offering more shares to the public after IPO.
Types of FPO.
There are two main types of FPOs:
Dilutive Follow-On Public Offer:
In dilutive FPO, the company offers new shares to the public. The main intent of this type of FPO is to raise additional funds. Here the earnings per share (EPS) of the company decreases as the number of shares increases.
Non-Dilutive Follow-on Public Offer:
In non-dilutive FPO, majority shareholders like promoters or directors of the company decide to sell their shares to the public. Here no new shares are issued, thus the earnings per share (EPS) of the company remains the same.
Non-Dilutive FPO doesn’t increase the company’s capital, as the earnings from the share belong to shareholders.
Main Difference Between IPO and FPO
In an IPO, a company decides to raise its funds by offering its shares to the public for the first time.
On the other hand, in an FPO, a company decides to raise funds either by diluting its shares or offering new shares after the IPO. Usually in FPO, the company issues shares at a lower price compared to the market price to get more subscribers.
How to Apply for an FPO
As we know there is a very minute difference between FPO and IPO, applying for FPO is similar to IPO.
Through Aliceblue you can easily apply for the FPO. Here is what you need to follow.
- Step 1: Open your free Demat account with Aliceblue in just 15 minutes. Already have an account !! Then just simply login to Alice IPO.
- Step 2: Choose from the FPO you want to apply and place your bid.
- Step 3: Once the bid is placed via UPI, the UPI App will block funds in your Bank account proportional to the bid (Till the allotment date). If the shares are allotted to you, the money will be debited from your account, if not, the money will be unblocked.
- FPO stands for follow on public offer. A company opts for FPO to raise additional funds by issuing more shares.
- Through non-dilutive FPO the early investors of the company can sell their privately held shares.
- The issue price of the FPO is usually lower than the existing market price.