The FPO is raised for two intentions:. This decreases the share price as well as the reduction in earnings per share. Non-Dilutive FPO means the shareholders of the company sell their private shares in the market.
Applying this method increases the number of shares available to the investors while it does not increase the number of shares for the company. The objective of an IPO is to raise capital from investors by selling its shares to the general public to grow and expand its business. The primary objective of a company to issue FPO is to expand its equity base.
However, FPO can also be used to reduce the shareholdings of a promoter. Performance is a major difference between FPO and IPO because it tells how much knowledge or information an investor knows about a company before buying allotted shares.
In IPO, investors have to go through a preliminary document by a company known as the red herring prospectus. They do not have any major guidance or track record about a company in which they are investing. Brand Solutions. Video series featuring innovators. ET Financial Inclusion Summit.
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As the number of shares increases, the earnings per share decrease. Non-diluted follow-on offerings happen when holders of existing, privately-held shares bring previously issued shares to the public market for sale. An IPO is the first public issue of the shares of a private company that is going public whereas an FPO is the subsequent public issue of the shares of an already listed public company.
IPO is released with an intention to raise capital through public investment whereas FPO is offered with an aim to inflow subsequent public investment. On the other hand in FPO, the investors are aware as the company is already listed on the stock exchange.
The main objective in the case of an IPO is to raise capital through public investment, while for FPO, the main objective is subsequent public investment.
This is sometimes also known as a secondary offering. It looks to sell additional shares to raise more capital. Therefore, the company XYZ would hire an investment bank to underwrite the offering, register it with SEBI and then handle the sale of the secondary shares. A lot of organization agrees to have a lock-up period to infuse confidence in the market and provide stability during the IPO.
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