The term “FPO” stands for “Follow-on Public Offering.” It is a process by which a company that is already publicly listed issues additional shares to investors, usually to raise more capital. Understanding FPO is crucial for both investors and businesses as it impacts market dynamics and investment strategies. Here are some key pointers to know about FPOs:
Purpose of FPO: Companies opt for FPOs to raise additional funds for expansion, debt repayment, or other corporate purposes. It helps in strengthening the company’s financial base without taking on additional debt.
Types of FPO:
Dilutive FPO: Increases the total number of shares, thus diluting the ownership stake of existing shareholders.
Non-Dilutive FPO: Shares are sold by existing shareholders, not increasing the number of shares but changing ownership distribution.
3. Difference from IPO: An Initial Public Offering (IPO) is the first sale of shares to the public, whereas an FPO is conducted by an already publicly listed company.
4. Investor Implications: FPOs can offer a good buying opportunity as they are often priced at a discount to the current market price. However, they also require careful analysis of the company’s reasons for raising funds and its financial health.
5. Regulatory Aspect: Like IPOs, FPOs are also subject to regulatory scrutiny and must comply with the guidelines set by securities regulatory authorities to protect investor interests.
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