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IPO (Initial Public Offering) vs FPO (Follow Up Offering)

IPO stands for initial public offering. It is the initial selling of stocks by any private company or firm to the public. Generally, these offerings are issued by small and young companies who require funds and capital for expansion purposes. In the case of bigger companies, the offerings are issued when they want to trade publicly or for publicity. In an IPO, assistance or aid is obtained by the issuer from a particular firm, known as an underwriting firm which help the issuer choose the type of security i.e. common or preferred keeping in mind two factors- the best price which can be offered and the proper time to bring it to the market. However, such public offerings can be a risky proposition.

For an individual, generally it is tough to predict accurately how a company’s stocks will behave on the initial day of trading as well as in the near future because little or no historical data is available based on which analysis can be made. Also, there is no analytical way of determining what will happen to previously invested money on stocks. When firms or companies go through a transitory growth period for attaining future development and reputation, there is a lot of uncertainty pertaining to future value of stocks.

On the other hand, FPO stands for follow-up public offering. Issuing FPOs are popular methods by which companies who are already established on the exchange, raise additional equity capital in the capital markets through issue of stocks. Public companies can also take advantage when an FPO is issued as an offer for sale to investors, made through an offer document.

It is a common observation that public offerings initially made are more lucrative than follow-up public offerings. As a point of distinction between the two, the initial offering is made when a company has compiled money and the follow-up offering is the subsequent public contribution.

Conclusion

When a company that has already gone through the IPO process and has been publicly listed on the exchange, calls for issuing extra shares for reimbursement of bills or funding of any sorts to investors, it is called a FPO.

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