IPO vs. FPO: What's the Difference?
Edited by Harlon Moss || By Janet White || Updated on November 17, 2023
IPO refers to the first sale of stocks by a company to the public, while FPO represents a subsequent issuance of shares to the public after the IPO.
Key Differences
An IPO, or Initial Public Offering, is the mechanism through which a company goes public for the first time by issuing its shares to the public. It represents the first sale of stocks by the company to public investors. On the other hand, an FPO, or Follow-on Public Offering, takes place after the company is already publicly traded. When companies need to raise additional capital, they opt for an FPO to issue more shares to the public.
With an IPO, a previously private company transitions into a publicly-traded entity, allowing it to tap into a larger pool of potential capital from public investors. The IPO process involves multiple stages, including selecting underwriters, setting a price band, and listing on an exchange. Conversely, the FPO is simpler as the company is already familiar with the public offering process.
Investors often view IPOs with keen interest as they offer an opportunity to invest in a company's shares at the ground floor. In contrast, an FPO might not attract the same level of interest since the company's shares are already in circulation. Nevertheless, an FPO provides existing shareholders and potential investors an opportunity to adjust their holdings or enter the stock at a potentially different valuation.
The primary motive behind an IPO is to raise capital for expansion, pay off debts, or provide liquidity to existing shareholders. FPOs, meanwhile, are usually driven by a company's need for additional funds post going public, which can be for a variety of reasons including expansion, acquisitions, or debt repayment. Both IPOs and FPOs are critical tools in a company's financial strategy, aiding in capital acquisition and facilitating growth.
Comparison Chart
Definition
First sale of stocks by a company to the public.
Subsequent issuance of shares by a publicly-traded company.
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Occurrence
Takes place when a company goes public for the first time.
Happens after the company is already publicly traded.
Primary Objective
Raise capital, expansion, pay off debts.
Raise additional funds, expansion, debt repayment.
Investor Perception
Opportunity to invest at the ground floor.
Adjust holdings or invest at a different valuation.
Complexity
Involves multiple stages like selecting underwriters.
Simpler as the company is familiar with the public offering.
IPO and FPO Definitions
IPO
Initial Public Offering representing a company's debut in the stock market.
Investors eagerly awaited the company's IPO announcement.
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FPO
An offering of shares after the company's initial public listing.
The company used the FPO proceeds for research and development.
IPO
A company's first sale of equity to public investors.
The successful IPO enabled the company to raise significant capital.
FPO
Secondary stock issuance by a company to meet financial objectives.
Their recent FPO was a strategic move to strengthen the balance sheet.
IPO
The process by which a previously private company becomes publicly traded.
The firm's IPO was oversubscribed within hours of its launch.
FPO
A method for publicly-traded companies to raise additional capital.
Given their debt situation, an FPO seemed like a feasible solution.
IPO
The first issuance of stock shares to the public by a company.
The tech startup decided to go public through an IPO.
FPO
Follow-on Public Offering, a subsequent stock issuance post an IPO.
The company's FPO was aimed at acquiring a competitive firm.
IPO
The mechanism allowing companies to tap into public markets for funding.
The organization's growth strategy heavily relied on its upcoming IPO.
FPO
Issuance of shares to the public by an already publicly traded company.
To finance their expansion, the corporation launched an FPO.
IPO
A corporation's first offer to sell stock to the public
FAQs
When can a company issue an FPO?
A company can issue an FPO after it's already publicly traded and needs to raise additional capital.
Can a company have multiple FPOs?
Yes, a company can have multiple FPOs whenever it needs to raise more funds.
How are IPO prices determined?
IPO prices are typically determined by underwriters through book-building or fixed price methods.
Are IPOs available to retail investors?
Yes, IPOs are typically open to institutional, retail, and other investor categories.
What is an IPO?
An IPO, or Initial Public Offering, is the first sale of stocks by a company to the public.
Is IPO a one-time process?
Yes, IPO is a one-time event where a company goes public, while FPOs can occur multiple times.
Why do companies opt for an IPO?
Companies choose IPOs to raise capital, provide liquidity to shareholders, expand, or pay off debts.
Can a company withdraw its FPO?
Yes, based on certain conditions or lack of interest, a company can withdraw its FPO.
How does FPO differ from IPO?
FPO, or Follow-on Public Offering, is a subsequent issuance of shares by a company that's already publicly traded.
Is investing in an IPO riskier than an FPO?
IPOs can be riskier due to lack of historical trading data, while FPOs have established market presence.
Who can participate in an FPO?
Existing shareholders and new investors can participate in an FPO.
How soon can a company launch an FPO after its IPO?
There's no fixed timeframe, but a company generally waits to ensure stability post-IPO before launching an FPO.
Are IPOs always successful?
No, IPOs can underperform or get undersubscribed based on market conditions and company fundamentals.
Can international investors participate in an IPO?
Yes, but it depends on the regulatory environment and the company's offer document.
Why might a company prefer FPO over taking on debt?
FPOs don't increase debt obligations and avoid interest costs, making them preferable in certain scenarios.
Is an FPO always at a fixed price?
No, FPOs can be at a fixed price or through a book-building process.
Why might a company's stock price fluctuate post-FPO?
Stock prices can fluctuate due to market perception, use of FPO proceeds, and overall market conditions.
How can I invest in an IPO?
You can invest in an IPO through brokerage firms during the subscription period.
Do FPOs dilute company ownership?
Yes, FPOs can dilute existing shareholders' ownership if they don't participate proportionally.
How are IPO funds utilized?
IPO funds can be used for various purposes like expansion, acquisitions, or debt repayment as specified in the offer document.
About Author
Written by
Janet WhiteJanet White has been an esteemed writer and blogger for Difference Wiki. Holding a Master's degree in Science and Medical Journalism from the prestigious Boston University, she has consistently demonstrated her expertise and passion for her field. When she's not immersed in her work, Janet relishes her time exercising, delving into a good book, and cherishing moments with friends and family.
Edited by
Harlon MossHarlon is a seasoned quality moderator and accomplished content writer for Difference Wiki. An alumnus of the prestigious University of California, he earned his degree in Computer Science. Leveraging his academic background, Harlon brings a meticulous and informed perspective to his work, ensuring content accuracy and excellence.
