What is Follow-On Public Offer (FPO)?
A follow-on public offering (FPO) is the issuance of shares to investors by a company listed on a stock exchange. A follow-on offering is an issuance of additional shares made by a company after an initial public offering (IPO). Follow-on offerings are also known as secondary offerings.What are Two Types of FPOs?
- Dilutive offering: A dilutive FPO is when the company wants to release more shares to collect more funds. This is done to pay off the debts. However, in the case of a dilutive FPO, a company's value remains unchanged, which results in a decrease in the per-share earnings of the company.
- Non-dilutive offering: In this case, the founders or large shareholders of the company release some of their shares to the public. The money from this goes to the individual offering the shares and not the company. Therefore, the per-share earnings of the company remain unaffected.
How FPO is different from IPO?
An Initial Public Offering (IPO) is the issuance of shares for the first time by a private company, which is not listed the stock exchanges. Post the issuance of such shares, the company gets listed on the bourses and its shares then traded publicly.
On the other hand, a follow-on public offer, as name suggests, is a subsequent or second-time issuance of shares after the Initial IPO?