IPO VS FPO

INTRODUCTION : In  the modern scenario, there is a cut throat competition in the business . To continue the business affairs in a systematic way we need funds to finance their day to day operations. To continue stand in the market , the business needs a funds. 

           There are two ways of raising funds for the business. In the form of equity which mean the owned capital of the company or debt which represents the borrowed capital of the company. When funds are raised as equity, the company approaches various individuals to sell it's shares at a fixed price. When this offering is done by the company for the first time it is known as IPO or INITIAL PUBLIC OFFERING. On the other hands , when the shares offered to sale for the second, third or fourth time is called FPO or FOLLOW ON PUBLIC OFFERING.

        In a today's time, public offering has a very significant place in the market. If you want to invest your saving in the market, then it would be beneficial to have a proper knowledge of specific words which are used in the market.

WHAT IS AN IPO ?   

      IPO means Initial public offering . It is the first time a company goes public. When we say a company has gone public, it means it has offered it's shares to the public at large and is ready to get listed at the stock exchange of the country. We have two exchanges : BOMBAY STOCK EXCHANGE AND NATIONAL EXCHANGE . The first time the company visited at bombay stock exchange, national stock exchange or both and offers it's shares to be publicly traded the offering is called an IPO.

WHAT DOES IT MEAN FOR THE COMPANY ?

      When a company is set up , it gets funding from various corporations, investors , angel investors, venture capitalist sometimes evn the government . Once the company reaches a bigger rahe of expansion and these funds out or are insufficient , a company launches an IPO,goes public for the first time and gets listed on the exchange.  It means that the company will get funding when you invest in it but it also comes with a great deal of responsibility of running the company in an efficient way so that it's shareholders do not run into losses. It also means increased liquidity for the company. 

WHAT IS A FPO ? 

   FPO is a follow up to the IPO as the name suggests . A follow on public offers is the issuance of shares after the company is listed on a stock exchange. In other words , an FPO is an additional issue whereas an IPO is an Initial issue.

WHAT DOES IT MEAN FOR THE COMPANY ?

   An FPO is done to raise additional capital or to reduce existing debt and a company does it in two ways. 

DILUTIVE FPO : In dilutive FPO , the company issues and additional no. of shares in the market for the public to buy however the value of the company remains the same . This reduces the price of shares and automatically reduces the earnings pee share also.

NON-DILUTIVE FPO :  Non - dilutive FPO takes place when the larger shareholders of the company like the board of directors or founders sell their privately held shares in the market. This technique does not increase the number of shares for the company , just the number of shares available for the public increases. Unlike dilute FPO , since this method is not doing anything to the number of shares of the company. It does not do anything to the company's EPS.

FPO VS IPO 

 1. MEANING : IPO is the first issue of shares by the company and is gone publicly. It is ready to get listed at the stock exchange of the country. On the other hands , FPO is the follow up public offering issuance of shares by a company to raise additional capital after IPO.

2. PRICE : In IPO , prices are fixed or variable price range. And in FPO, the price is market driven and dependent on number of shares increasing or decreasing.

3. SHARE CAPITAL :  IPO is increases because the company issues fresh capital to the public for listing. While in FPO, number of shares increases in dilutive FPOand remains the same in non-dilutive FPO.

4. VALUE : The value of IPO is expensive while the FPO is cheaper in most cases because the value of the company getting further diluted .

5. RISK : IPO is riskier while FPO is less risky in comparison to IPO.

6. STATUS OF THE COMPANY : An unlisted company issues an IPO while an already listed company issues an FPO.

       It depends on your risk level and goals. Your risk levels need to be extremely high to invest in an IPO because you do not have much idea about the company . An IPO is relatively a safer bet for individual investors and new investors.