IPO vs FPO: What's the difference?
Running a business, both big and small, requires funds. These funds may be required either for expansion and diversification or for fulfilling the cash flow needs. The funds can be raised by borrowing from creditors or by offering equity to the investor. IPOs and FPOs are two such paths that are undertaken by companies who want to raise funds from the general public.
Let us know the difference between IPO and FPO
Initial Public Offer or IPO, as the name suggests, is the first public issue of shares that takes place when a company wants to raise funds by offering an equity stake to the public. With the help of an IPO, a company becomes a listed company from an unlisted one. An IPO is riskier as the investor does not have much information about the company. Therefore, it becomes difficult to forecast the future growth of the company. However, this type of public offering offers more scope to make profits.
Follow-On Public Offer or FPO, as the name suggests, is the process that offers additional shares to the general public, thereby expanding the equity base of the company. FPO is done by companies that are already listed on the stock exchanges. An FPO is relatively less risky as the investors have information about the company. By studying the past performance of the company, the investors can decide whether to invest or not. However, the scope to make profits is relatively lower.