IPO vs FPO: If a company wants to raise money by getting listed in the stock market for the first time, then it comes with an Initial Public Offer (IPO). With this the company becomes public and its shares get listed in BSE or NSE. When a listed company wants to raise money from the market again for its expansion and other needs, it comes with a follow-on public offer (FPO).
IPO vs FPO: Vodafone Idea (VI), the country’s leading telecom company facing financial crisis, has come up with a follow-on public offering (FPO). The company has planned to raise Rs 18000 crore from the market to ease its problems. The most interesting thing about this is that this is the country’s largest FPO till date, which will be subscribed from 18 to 22 April.
The allotment date of VI FPO is 23rd April. There is a possibility that the company’s FPO shares will be listed in BSE and NSE on April 25 itself. If you are also confused between FPO and IPO, then here we are giving you detailed information about the difference in these days.
Difference between FPO and IPO
When a company wants to raise money by getting listed in the stock market for the first time, it comes with an Initial Public Offer (IPO). By doing this, it issues shares to the public for the first time and lists the company’s shares on the stock exchange. With this the company becomes public and its shares get listed in BSE or NSE.
On the other hand, when a listed company wants to raise money from the market again for its expansion and other needs, then it comes with a follow-on public offer (FPO). For this, the promoters and big shareholders of the company sell their stake in the market.
How does FPO work?
Usually, when companies need additional funds to start a new business or to repay a loan, they come up with FPO. The company does this in two ways.
The first way is by issuing additional shares to the people. In this the value of the company remains the same. This is known as a dilutive FPO. As the number of shares increases the price per equity share decreases.
Talking about the second method, the big shareholders of the company offer to sell their equity in the market. By doing this, the promoters and big shareholders of the company sell their stake. In this, the number of shares of the company remains the same and there is no impact on the valuation.
Opportunity for investors
Like IPO, investors can participate in FPO by bidding. Successful buyers get shares. Investing in FPO may be less risky than IPO. Understand it this way, when you invest in an IPO, you choose a stake in a private company and you get to know the profit or loss only after the shares of the company are listed.
On the other hand, in FPO you buy shares of a listed company. Here the trend of share price, company and other related information is known in advance. Along with this, investors can further increase their stake in the company by investing in FPO. If the company’s record is good then there is a possibility of better growth.
