The phrase “follow-on public offer,” or “FPO,” is frequently used in reference to stock markets and public investments. This is particularly true in India, where there is a developing capital market.In this article we will discuss what is fpo, types of fpo and advantages of fpo for investors. So let’s start.
What is fpo in share market
FPO is a way for firms who are currently listed to raise more money from the general public.An FPO is when a company that is already publicly listed issues shares to investors, as opposed to an IPO, which is when a company goes public for the first time.Through this procedure, businesses can lower their debt, fund expansion objectives, and diversify their equity base.
Types of fpo
There are mainly two types of fpo;
Dilution
The corporation issues additional shares in a dilutive FPO, increasing the total number of shares in circulation. As a result, current stockholders’ stake is diluted. On the other hand, the company gains immediate advantages from the funds raised. It allows it to decrease debt or pursue expansion projects.This is the most prevalent type of FPO. It’s usually viewed favorably if the business has development potential and a strong track record.
Non dilution
Non-dilutive FPOs don’t entail the corporation issuing new shares, in contrast to dilutive ones.Rather, current investors like venture capitalists and promoters sell out a portion of their ownership. Although this makes the shares more liquid, it doesn’t give the business any additional funding.With this kind, investors should exercise caution since it can mean that long-term major shareholders are cutting back on their ownership.
Advantages of fpo for investors
There are the following advantages of fpo for investors;
Low risk
It has reduced risk profile because the firm is already publicly traded and more information is available for due diligence. Investment in an FPO is typically regarded as less riskier than investing in an IPO.
Possibility of High Profits
As long as the funds are raised effectively, investors stand to benefit from capital appreciation.
Ownership
With the use of FPOs, current shareholders can increase their ownership stake by acquiring more shares without the need for outside borrowing from the business.
Market sentiment
in the Market An FPO frequently improves the company’s image in the eyes of the market, at least temporarily. It is advantageous to current owners.
Diversification
Without having to wait for a fresh, impending IPO, an FPO enables new investors to join the market and diversify their holdings.
FAQs
What is fpo?
Ans. An organization that is already publicly listed on a stock market may sell additional shares through a follow-on public offering, or FPO.
What is the difference between ipo vs fpo
Ans. The first public offering of a company’s shares is called an IPO.A follow-on offering (fpo) is the sale of extra shares by a publicly traded firm that is already listed on a stock exchange.
