FPO vs IPO

An FPO is when an already listed company issues more shares to raise funds. An IPO (Initial Public Offering) launches a private company into public markets by selling shares for the first time, while an FPO (Follow‑on Public Offering) is an additional share issuance by an already listed firm.

Ever wondered how an FPO is different from an IPO? We’ve broken it down in simple terms so you can easily understand what sets them apart and why it matters.

Introduction to IPO and FPO

• If you’re starting to explore the world of investing, you’ve probably come across the terms IPO and FPO.
• They’re common in the stock market but can feel a bit confusing at first. IPO stands for Initial Public Offering and FPO means Follow-on Public Offering.
• Both are ways companies raise money from the public by offering shares.
• In this blog, you’ll learn what FPO and IPO mean, how they work, and understand the IPO and FPO full form in a clear, easy way.

Why Do Companies Go Public?

• Companies go public to raise money. It helps them grow, launch new products or pay off debt.
• They do this through IPO and FPO. IPO is when a company sells shares to the public for the first time. A company launches an FPO after it is already listed.
• That’s the basic IPO and FPO difference. Going public also builds trust and improves visibility.
• It’s a big step that opens new doors for both the company and investors. And for everyday people like us, it’s a chance to own a small piece of a growing business. Sounds exciting, right?

Overview of IPO and FPO in the Capital Market

• In the capital market, companies raise money by offering shares to the public.
• They do this through IPO and FPO. IPO full form is Initial Public Offering. It’s when a company sells its shares to the public for the first time.
• FPO full form is Follow-on Public Offering. This happens after the company is already listed on the stock exchange.
• The main difference between IPO and FPO is timing. IPO helps a company enter the market, while FPO helps it raise more funds later. Both play a big role in the growth of companies and the market itself in the context of what is investment banking.

What is an IPO (Initial Public Offering)?

• An IPO (Initial Public Offering) is when a company decides to go public.
• It opens up its shares for everyday people to buy for the first time. This helps the company raise money and grow.
• You might remember when Zomato went public. Lots of people got a chance to invest in it.
• That’s what an IPO is all about. It turns a private business into something anyone can own a piece of.

Definition and Purpose

• When it comes to the stock market, FPO vs IPO is a common comparison.
• Both are ways companies raise money from the public. But they happen at different stages.
• An IPO is the first time a company offers shares. An FPO happens later, once it is already listed. Understanding IPO and FPO helps you make smarter investment choices.
• It is not as complicated as it sounds. Just two steps in a company’s growth journey.

How an IPO Works

• So, how does an IPO work? A company decides to go public and raise money.
• It gets approvals and sets a price for its shares. Then, the shares are offered to the public for the first time. That’s what an IPO is.
• Knowing what is FPO and IPO, along with IPO and FPO full form, makes it easier to understand the process. It’s a big moment for any business.

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What is an FPO (Follow-on Public Offering)?

• An FPO, or Follow-on Public Offering, is when a company that’s already listed decides to offer more shares.
• It usually means they need extra funds to grow or manage something new.
• Unlike an IPO, which is their first time selling shares to the public, this comes later.
• That’s the main idea behind FPO vs IPO. For example, Yes Bank did an FPO a while after its IPO to raise more money.
• It’s a smart move when a business wants to keep expanding. Now you’ve got a clear idea of what is FPO and IPO without overthinking it.

Definition and Purpose

• An FPO is when a company that is already on the stock market wants to raise more money.
• It might need the funds to grow, pay off loans or start something new.
• This is not its first time selling shares. That would be an IPO.
• The main difference between IPO and FPO is when they happen in a company’s journey.
• Once you know the IPO and FPO full form, it is much easier to see how it all fits together.

How an FPO Works

• An FPO happens when a company that’s already public wants to raise a bit more money.
• They offer new shares to people, sometimes at a lower price. Investors can choose to buy in if they believe in the company’s plans.
• For example, Coal India offered more shares a while back to support its expansion. It’s just a way for companies to bring in funds without starting from the beginning again.

IPO vs FPO: Key Differences

• The difference between IPO and FPO mainly comes down to timing.
• An IPO is the first time a company offers its shares to the public. An FPO comes later, once the company is already listed.
• In an IPO, the company is usually unknown to investors. With an FPO, people already have some idea about its performance.
• The FPO vs IPO comparison also includes risk. IPOs can be riskier as the company is new to the market.
• Understanding the difference between IPO and FPO helps you make better investment choices.

Timing of Issuance

• By now, we have an understanding of what is FPO and IPO. The key point is when they happen.
• An IPO takes place when a company offers shares for the first time. An FPO comes later, after the company is already listed.
• That’s the core of the IPO and FPO difference. For example, LIC had its IPO in 2022 to enter the stock market.
• If it offers more shares later, that would be an FPO. Knowing the IPO and FPO full form helps make all this much easier to follow.

Company Stage and Objectives

• The difference between FPO and IPO also shows in the company’s stage. An IPO is done by a private company just entering the stock market.
• It’s often a young business looking to grow fast. On the other hand, an FPO is done by a company that’s already public and wants more funds to expand further.
• Think of startups like Paytm launching an IPO to go public. Later, a more established company like ONGC may go for an FPO to fund new projects.
• The difference between FPO and IPO is clear when you look at what the company needs at each point.
  

Pricing Mechanism

• One big IPO and FPO difference is how the share price is set.
• In an IPO, the price is often based on demand and company valuation.
• In an FPO, it is usually lower to attract more investors, like when RIL offered shares at a discount.
• This is another clear IPO and FPO difference to keep in mind before investing.

Risk and Investor Perspective

• IPOs usually carry more risk. The company is new to the market, and there’s limited public data.
• Investors have to rely on future potential. FPOs feel safer as the company is already listed and has a track record.
• That said, no investment is risk-free. It’s always smart to read the offer documents and do your own research.

Regulatory Process and Compliance

• Both IPOs and FPOs need approval from market regulators like SEBI. Companies must follow strict rules before offering shares to the public.
• This includes sharing financials, business plans, and risks. It helps protect investors and keep things transparent.
• The process might feel slow, but it’s there for a reason. It makes sure everything is fair and above board.

Which is Better for Investors: IPO or FPO?

• It really depends on your comfort with risk. IPOs can bring high returns, but they’re unpredictable.
• You’re betting on future growth without much history to go by. FPOs are usually more stable, since the company is already listed.
• Some investors love the thrill of an IPO, while others prefer the steady nature of an FPO. There is no one right choice. It all comes down to what suits your style.

Investment Considerations

• Before investing, always look at the company’s goals and financial health. Read the offer documents carefully.
• The difference between FPO and IPO can affect your decision. IPOs may offer big returns but come with more risk.
• FPOs feel safer but might give slower growth. Knowing the difference between FPO and IPO helps you choose what fits your risk level and goals.

Market Sentiment and Stock Performance

• Market mood can make or break an IPO or FPO. If investors are excited, stocks may shoot up. But if confidence is low, even strong companies can struggle. Timing really matters.

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Final Thoughts: Choosing Between IPO and FPO

• Choosing between an IPO and FPO comes down to your risk appetite. 
• If you enjoy spotting potential early, an IPO might excite you. If you prefer something more stable, an FPO could be a better fit.
• Both have their pros and cons. The key is to do your homework and stay clear on your goals. After all, smart investing, and choosing the right Investment Banking course is more about patience than luck.

FAQs on FPO vs IPO

What is the main difference between IPO and FPO?

An IPO is the first time a company sells shares to the public, while an FPO happens after it’s already listed.

Is FPO safer than IPO for investors?

Usually yes, because the company has a track record. But like all investments, it still carries some risk.

Can a company issue multiple FPOs after an IPO?

Yes, as long as it meets the rules and has a reason to raise more funds, it can offer more FPOs.

Which offers better returns: IPO or FPO?

IPOs can give higher returns, but they’re riskier. FPOs tend to be more stable but with steadier gains.

Partham Barot is an ACCA-certified professional. showcasing his expertise in finance and accountancy. he’s revolutionising education by focusing on practical, real-world skills. Partham’s achievements underscore his commitment to elevating educational standards and empowering the next generation of professionals.