What Is The Difference Between IPO and FPO
Before entering the stock market, there are two essential terms in which investors can invest their money: IPO and FPO.
The meaning of term IPO is (Initial Public Offering), and the meaning of term FPO refers to (Follow on Public Offer). When the company issued any of them, then the motive of the company is to gain its capital from the equity market.
If you are a beginner and want to invest in any of these, it is mandatory to know about the difference between IPO and FPO. Investing in the share market without knowledge can increase the chances of tremendous loss. That’s why it is always suggested never to invest in the stock market if you don’t know how it works. There are various options from which you can learn about the stock market. One can join the institutes where you will have different stages and factors of the stock market under the guidance of well-experienced faculty. Although choosing the wrong mentor or institute can be the worst decision of your life, If you want to be an expert in the share market, join the Best Share Market Institute in Delhi.
This article will clarify what IPO is and What is FPO.
What is IPO?
The complete form of IPO is (Initial Public Offering), in which the IPO company issued the shares for the first time in the market for the general public.
When any company issues the shares in the market, they become an issuer, and under the guidance of serval investment banks, it all will be done. Once the company issued they IPO in share market then the shares of that company can be traded easily market
Is there any reason for issuing IPO by the company? Yes, when any company needs to raise the capital and fund for the initial growth, the company gives shares in the market.
How Many Types of IPOs Are There in the Market?
When it comes to the different types of IPOs, then there are two types.
1 Fixed Price Issued
There is an offer document in which the company mentioned its fixed price of all the shares in which they are issued in the market. Before company shares enter in share market, the price of a particular claim is decided by the company for every investor,
And while subscribing to the IPO, every investor needs to pay a fixed price.
2 Book Building Issue
Based on the recording demand of investors, the price is issued. In this type of IPOs company does not issue the fixed cost of their share.
What is FPO?
The Full Form of FPO Follows on Public Offering. The listed company issued the shares for their existing shareholder holders and the new investors.
For expanding the base of equity company issued the FPO. The facility of FPO can only be used by the company when they give the shares in for the first time to the general public in the form of an IPO.
In simple words, we can say that IPO should be issued first, and then other growth companies can issue FPO.
There are two aims for which company issues FPO and those two are
1 When a company wants to raise additional capital for the growth of the company
2 And to reduce the current debt of the company.
How Many Types of FPO?
Now let’s discuss on the different types of FPO
1 Dilutive FPO
In this type of FPO, the company issued extra shares to expand the company’s equity. But in this type of FPO, there is no change in share price. In this price of a claim is decreases, and the earning per share is also reduced.
2 Non- Dilutive FPO
In this type of FPO, the current shareholder will sell his shares in the market. This process will increase the number of available shares to the investors. However, there is no chance of decreasing the number of shares.
Significant Difference Between IPO and FPO
Now the essential part of this article and the primary purpose behind writing this article.
1 Objective – IPO vs FPO
To raise capital for the expansion and growth of the business, they share them with the general public and investors. When the company achieves its goals after issuing the IPO, they have to give FPO whenever the company needs additional funds.
Expanding the company’s equity base is the primary motive of issuing FPO. And for reducing the holding of the promoter, FPO can be used.
2 Performance IPO vs FPO
When it comes to performance, it is the crucial decision between IPO and FPO because it is essential to know about the company’s information before buying the allotted shares.
Investors have to go through the preliminary documents to get the company’s knowledge. Sometimes investors did not records of company in which they will invest. That’s why there are some perception management debt books.
On the other hand, in FPO, investors have important company information; they also have a track record of market interest. Also, they know about the company’s performance after IPO is issued.
3 Profitability IPO vs FPO
In comparison, FBO IPO gives higher returns to the investor because investing in IPO is part of the company’s growth.
When we compare risk factors, FPO is safer than IPO because, in FPO, investors gain knowledge about the company’s performance. Before investing in FPO, investors can analyse the past performance of the company and decide to invest the money or not.
Also Read- What is Minimum One Needs to Invest in Indian Stock Market
Frequently Asked Questions
Q1 Can IPO give higher returns in comparison to FPO?
Yes, IPO gives higher returns and profitability than FPO because when the company issued IPO, that time is the company’s growth.
But when it comes to risk factors, then FPO is safer. Because one can analyse current company performance based on past performance
Q2 What is the main objective of issuing an IPO?
The company issued the shares for the common public with the motive of increasing capital and funds of the company for the growth of its business and expansion.
Q3 What is the main Objective of Issuing FPO?
Whenever a company needs to increase its equity base in the market, it issues FPO for the initial investors and new investors.
Final Say
In the end, the IPO is issued to the general public to increase company capital. On the other hand, the listed company issued an FPO to increase the equity base in the market.
These fundamental differences between IPO and FPO will help you make your vision clear on the investment and help you invest your money on the right track.
Although it is always suggested never to enter in share market if you don’t know how it works, learning about the share market can be done in various ways. You can join the Stock Market Course in Delhi for this also.
