ABOUT FPO/IPO PUBLIC ISSUES
To finance their day-to-day activities, all business organisations require a steady flow of funds. As a result, there are two methods to raise cash for a business: through stock or through debt, which represents the company's borrowed capital. In equity, the entity seeks numerous persons to sell its shares at a predetermined price, and this is referred to as an IPO when done for the first time. When, on the other hand, shares are offered for sale in preparation for a later public contribution, this is referred to as FPO.
Today, it is important and advantageous to have a basic understanding of the terms IPO and FPO, which are frequently used in the stock market. Also, see below for a comparison of FPO vs. IPO.
DEFINITION OF IPO
IPO is an acronym for Initial Public Offering. When a business goes through the process of becoming publicly traded and listed on the stock market, the initial public offering (IPO) is the major source of the company in obtaining money from the general public to finance its projects, and the firm allots shares to the investors in exchange.
DEFINITION OF FPO
FPO (Follow-On Public Offer) Definition: An FPO is an acronym for a Follow-On Public Offer. Following an IPO, the FPO procedure begins. A FPO is a public offering of shares to the general public by a publicly traded corporation. In FPO, the firm seeks to diversify its stock base by issuing more shares to the general public. The firm provides a prospectus.
FPO comes in two varieties:
1. Offering that is dilutive
2. Non-dilutive option
Now that we've studied what an IPO is and what an FPO is, let's understand the difference between the two and compare the two. Fund flow is required for a firm to function and develop. Not just start-ups, but even well-established businesses, require cash to continue with their current processes and to develop their firm. Because it is not always possible for the firm's owner to offer a constant flow of cash, issuing shares to the general public is the most expedient way for a company to obtain capital.
IPO VS. FPO: WHAT'S THE DIFFERENCE?
The initial public offering of shares of a private business that is coming public is known as an IPO, whereas the second or subsequent public offering of shares in a publicly traded company is known as an FPO.
The IPO is issued with the purpose of raising cash through public investment, whereas the FPO is issued with the intention of attracting later public investment.
An IPO is typically riskier than an FPO since an individual investor has no idea what will happen to the firm in the future. Investors in FPO, on the other hand, are aware because the firm is already listed on the stock exchange. As a result, investors may examine the company's previous performance and draw predictions about its future growth possibilities.