How is a follow on offering different from an initial public offering (IPO)?
Understanding
the differences between a Follow-on Public Offering (FPO) and an Initial Public
Offering (IPO) is crucial for investors. Here’s a clear breakdown:
1.
Definition:
o IPO
(Initial Public Offering): This is
when an unlisted company offers its shares to the public for the first time and
gets listed on the stock exchange.
o FPO
(Follow-on Public Offering): This
occurs when a company that is already listed on the stock exchange issues
additional shares to the public.
2.
Type of Shares Offered:
o IPO: Only new shares are offered.
o FPO: Either new shares are issued, increasing the total number of
shares, or existing shares held by promoters are offered for sale again.
3.
Pricing:
o IPO: The company sets the price within a specified price band.
o FPO: Shares are typically offered at a discount to the current market
price to attract investors.