An IPO and FPO are two fundamental methods through which a company can raise capital from the equity market.
What is an IPO?
An initial public offering, or IPO, is when a company sells its shares to the general public for the first time and prepares to be listed on a stock exchange.
What is FPO?
An FPO, or Follow-on Public Offer, is when a company that is already listed on a stock exchange issues more shares.
Difference between FPO & IPO:
| Sr.no | Particulars | IPO | FPO |
| 1. | Meaning | A company’s first time selling shares to the public. | A company that’s already public sells more shares. |
| 2. | Price | Set price or a range before the sale. | Based on current market prices and can vary if more or fewer shares are offered. |
| 3. | Share Capital | Increases as new shares are sold to the public for the first time. | Increases with a dilutive FPO; remains the same with a non-dilutive FPO. |
| 4. | Cost | Generally more expensive. | Typically cheaper because the company’s value may be spread over more shares. |
| 5. | Risk | More risky. | Less risky then IPO. |
| 6. | Company status | Not listed on the stock market. | Already listed on the stock market. |
Conclusion:
When deciding whether to invest in an IPO (Initial Public Offering) or an FPO (Follow-on Public Offering), it’s important to consider your risk tolerance and investment goals. Investing in an IPO can be riskier because there’s often less information available about the company. This means you need to do more research compared to investing in an FPO, which is generally considered safer for individuals and new investors.
If you’re a long-term investor with a high-risk tolerance and believe in the company’s potential, an IPO might be worth considering. Remember that IPOs can offer higher returns if the company performs well, but they also come with more uncertainties.
Ultimately, you should assess your investment profile before making a decision, taking into account both the risks and potential returns.
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