What is the Difference Between IPO and FPO?
🆚 Go to Comparative Table 🆚The main difference between an Initial Public Offering (IPO) and a Follow-on Public Offer (FPO) lies in the issuance of shares by a company. Here are the key differences between the two:
- Meaning: An IPO is the first issuance of shares by a company, while an FPO is the issuance of shares by a company that is already listed on a stock exchange.
- Company Type: Unlisted companies issue IPOs, while companies that are already listed on the stock exchanges issue FPOs.
- Pricing: In an IPO, the price is either fixed or variable within a range, while the price of an FPO is dependent on the number of shares as they increase or decrease and the level of dilution it causes.
- Share Capital: An IPO increases the number of shares of a company, while an FPO can either increase or decrease the number of shares depending on the type of FPO.
- Objective: The primary objective of an IPO is to raise capital from investors by selling its shares to the general public, while an FPO is done to raise additional capital or reduce existing debt.
- Types of FPOs: There are two types of FPOs: dilutive and non-dilutive. In a dilutive FPO, the company issues additional shares in the market, increasing the number of shares available to investors. In a non-dilutive FPO, the shareholders of the company sell their private shares in the market, increasing the number of shares available to investors without changing the company's share capital.
In summary, an IPO is the first issuance of shares by a company to the general public, while an FPO is a subsequent issuance of shares by a company that is already listed on a stock exchange. The primary objective of an IPO is to raise capital, while an FPO is done to raise additional capital or reduce debt.
Comparative Table: IPO vs FPO
Here is a table comparing the differences between IPO (Initial Public Offering) and FPO (Follow-on Public Offering):
| Parameter | IPO | FPO |
|---|---|---|
| Meaning | The first issue of shares by a company to the public | The issuance of additional shares by a listed company to raise capital |
| Purpose | Raising capital for expansion, acquisitions, and debt repayment | Raising additional capital or reducing existing debt |
| Company Type | Unlisted companies issue IPOs | Listed companies issue FPOs |
| Pricing of the Issue | The pricing of an IPO can be fixed or within a range and is determined by the company in consultation with investment banks | The pricing of an FPO is determined by the market and the level of dilution that it causes |
| Increase in Share Capital | There is an increase in the number of shares | The number of shares available to the investors increases, but the company's total number of shares remains the same |
| Investment Risk | Investing in an IPO is generally riskier than investing in an FPO | Investing in an FPO is relatively less risky as the company is already listed and has a known track record |
| Regulatory and Legal Requirements | IPOs have more stringent requirements and involve more regulatory scrutiny than FPOs | FPOs have less stringent requirements compared to IPOs |
Both IPOs and FPOs involve issuing new shares to the public to raise capital, and companies issuing these shares must obtain regulatory approval. After issuance, both IPO and FPO shares can be traded on stock exchanges and are underwritten by investment banks.