What is FPO (Follow on Public Offer)?

The basic difference between Initial Public Offer (IPO) and Follow on Public Offer (FPO) is as the names suggest IPO is for the companies which have not listed on an exchange and FPO is for the companies which have already listed on exchange but want to raise funds by issuing some more equity shares.

Companies usually go to debt market for raising their short term needs. Either they issue bonds or get loans. But if they have massive expansion plans they may not raise sufficient funds in the debt market and even if they could it costs more. Companies come with follow on offer to restructure the business or to raise funds for new business or to expand the existing business.

Similar to an IPO a price band is fixed (usually with the help of Investment banks) for the issue and interested investors can apply for it. Unlike the corporate actions (such as bonus, rights issue; they are applicable only to the existing stake holders) FPO is open to all investors. The price band for the FPO depends on the market value of the existing company shares and the reason for raising funds.

October 18, 2008 | Filed Under Stocks

Comments

7 Responses to “What is FPO (Follow on Public Offer)?”

rijo on January 24th, 2010 8:50 am

Very well explained. Thanks
Kavina on January 31st, 2010 6:38 am

Hitherto, I’m really confusion between these terms. But this neat explanation clarified me
Harsha on February 2nd, 2010 6:29 am

Thanks it was very well defined!
vikram on February 19th, 2010 6:04 am

Thank for kind cooperation.
vijay on March 5th, 2010 5:35 am

How do we differentiate between Rights issue and FPO ?…..
RAMESH on March 5th, 2010 6:19 am

Can any 1 let me know the listing process of FMPS by mutual funds on NSE?
avijit on March 11th, 2010 9:00 pm

WHAT IS fully and partly convertible debentures?WHAT IS QIP?