Follow-on Public Offer(FPO)

Posted on February 4, 2023 by admin1 25

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Recently, Adani Enterprises canceled its Rs 20,000 crore Follow-on Public Offer.
- It came after the shares of the firm declined following allegations of accounting fraud by US short-seller Hindenburg Research.

What is a Follow-on Public Offering (FPO)?

A Follow-on Public Offering (FPO) is the issuance of shares to investors by a company listed on a stock exchange.
FPOs are also known as secondary offerings.
Companies may use an FPO to reduce debt or raise more capital for expansion.
They typically occur after the company has completed an initial public offering (IPO) to make its shares available to the public.

Types of FPO’S

Dilutive FPO:

This is the process where the company issues additional fresh shares to the public to raise capital.
It results in increasing the company’s total outstanding shares, decreasing the Earnings Per Share (EPS).

Non-Dilutive FPO:
- A non-diluted FPO is when the company’s largest shareholders, such as the founders or board of directors, offer the shares they hold privately to the general public.
- Unlike a diluted IPO, this method does not increase or decrease the company’s number of shares.

FPO vs IPO

IPO is the first issuance of shares by a company while an FPO is the issuance of shares by a company so they can raise additional capital after its IPO.
Price: In an IPO, the price is either fixed or variable as a range, while in an FPO the price is dependent upon the number of shares as they increase or decrease and is market-driven.
Issuance: The process for carrying out an FPO is similar to that of an IPO.

However, the FPO process is more cost-effective when compared to an IPO.

Risk factor: Compared to FPO, the risk factors involved while investing in an IPO are far higher.

Source:TOI

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