The types of FPOs are follow-on Public Offerings (FPOs): dilutive and non-dilutive. A dilutive FPO involves issuing new shares and increasing the total number available, which can dilute existing shareholders’ equity. Non-dilutive FPOs occur when existing shareholders sell their shares without creating new ones.
Content:
- What Is FPO In The Stock Market?
- FPO Example
- Different Types Of FPO
- Types of FPO – Quick Summary
- Different Types Of FPO – FAQs
What Is FPO In The Stock Market?
In the stock market, an FPO (Follow-on Public Offering) is when a publicly traded company issues additional shares to investors after its Initial Public Offering (IPO). It’s a way for companies to raise extra capital, either by offering new shares or selling existing ones.
An FPO, or Follow-on Public Offering, is a process where a listed company offers additional shares to the public. This can be done after the company has already completed its Initial Public Offering (IPO).
There are two types: dilutive and non-dilutive. A dilutive FPO introduces new shares, potentially reducing the value of existing shares. Non-dilutive FPOs involve selling shares held by existing shareholders, without increasing the total number of shares in the market.
For example, a company that initially issued 1 million shares in its IPO might issue 500,000 additional shares in a dilutive FPO. This increases total shares to 1.5 million, potentially diluting existing shareholders’ equity.
FPO Example
Imagine a company, XYZ Corp, initially issued 1 million shares during its IPO. Later, it decides to raise more capital through an FPO by issuing 200,000 new shares. This increases the total share count to 1.2 million, offering these additional shares to public investors.
Different Types Of FPO
The types of Follow-on Public Offerings (FPOs) include dilutive and non-dilutive. Dilutive FPOs issue new shares, increasing the share count and potentially diluting the value of existing shares. Non-dilutive FPOs involve existing shareholders selling their shares, without changing the total number of shares outstanding.
Dilutive FPOs
These FPOs involve issuing new shares, which increases the total share count. This increase in shares may dilute the value of existing shares owned by shareholders.
Non-dilutive FPOs
In contrast, non-dilutive FPOs occur when existing shareholders sell their shares. This does not impact the total number of shares outstanding, thus preserving the ownership percentage and value for current shareholders.
To understand the topic and get more information, please read the related stock market articles below.
Types of FPO – Quick Summary
- An FPO in the stock market occurs when a publicly traded company offers additional shares post-IPO to raise extra capital. This can involve issuing new shares or selling existing shares held by current shareholders.
- The types are dilutive, where new shares are issued increasing total share count and possibly diluting existing share value, and non-dilutive, involving the sale of shares by existing shareholders without altering the total shares available.
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Different Types Of FPO – FAQs
What are the types of follow-on public offers?
Follow-on public offers are mainly of two types: dilutive, where a company issues new shares, increasing overall share count and potentially diluting existing shares’ value; and non-dilutive, where current shareholders sell their shares without increasing the share count.
What is an example of a FPO?
An example of an FPO is when a company that initially went public decides to raise more funds by issuing an additional 500,000 shares, thereby offering these new shares to the public for investment.
How is FPO formed?
An FPO is formed when a publicly traded company decides to raise additional capital by issuing more shares. This is done either through issuing new shares (dilutive) or selling existing ones held by shareholders (non-dilutive).
What are the functions of FPO?
The main functions of an FPO include raising additional capital for the company post-IPO, providing an exit or profit-taking opportunity for existing shareholders, and potentially diluting or maintaining the current value of existing shares.
What is the difference between dilutive and non-dilutive FPO?
The main difference is that dilutive FPOs issue new shares, increasing the total share count and potentially diluting existing shareholders’ equity, while non-dilutive FPOs involve selling existing shares, not affecting the total share count.
We hope that you are clear about the topic. But there is more to learn and explore when it comes to the stock market, commodity and hence we bring you the important topics and areas that you should know:
