Difference between IPO and FPO – Investment Decisions | Finance

Difference between IPO(Initial Public Offering) and FPO(Follow-on Public Offering)
Finance | Investment
IPO Vs. FPO
Management Notes

S.No. IPO(Initial Public Offering) FPO(Follow-on Public Offering)
1.  Initial Public Offering refers to the shares offered to the public investors by the companies for the first time by listing the company in a stock exchange. Follow-on Public Offering refers to the additional shares offered to the public investors by the companies which are already listed in a stock exchange.
2.  The main objective of issuing IPOs by the companies is to raise capital through public investment and to increase exposure, prestige, and public image. The main objective of issuing FPOs by the companies is to restructure their business or raise funds for new business or to expand the existing business.
3. The rate of risk is high in case of IPOs as an individual investor cannot predict what will happen to the initial trading in the coming days. The rate of risk is low in case of FPOs as an investor already has an idea about the investment and future growth of the company.
4.  In case of IPOs there are extremely stringent regulatory requirements which are costly and time-consuming. In case of FPOs there are  less regulations,cost and less time-consuming as compared to IPOs.
5.  IPOs are considered usually more profitable than FPOs. FPOs are considered usually  less profitable than IPOs.
6.  IPOs can be of two types:

  • Fixed Price Issue : In this case, the issue price is pre ascertained by the issuer.
  • Book Building : In this case, an indicative price range is declared by the company for a public offer of its equity shares.

 

FPOs  are of two types:

  • Dilutive: In a dilutive FPO, the board of directors of a company agrees to increase the shares by selling more equity.
  • Non-dilutive: A non-dilutive FPO means selling privately held shares of the directors or insiders of a company.

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