What is the Difference Between Initial Public Offering and Follow-On Public Offer?

Initial Public Offering (IPO) is the process by which companies raise funds from the market. It is the facility by which a private company or corporation can become public through selling a portion of its stake to the investors as equity or shares. Once the IPO is done, the shares of the company are listed in the stock exchange and can be traded freely in the open market.

Follow-On Public Offer starts after an IPO. It is the further issue of shares to the general public to diversifying its equity base. There are two types of FPOs.

• Dilutive FPO: The Company issues an additional number of shares in the market for the public. But the value of the company remains the same.
• Non-dilutive FPO: Shareholders of the company like the board of directors or founders sell their privately held shares in the market through Non-dilutive FPO. It doesn’t increase the number of shares for the company but it increases the number of shares available for the public.

The key differences between Initial Public Offering and Follow-On Public Offer

• IPO is the process by which a company issues shares to the public for the first time. The issuing of shares by a company to raise additional capital after the IPO is called FPO.
• IPO is generally riskier than FPO. In IPO the Investors do not know about the future of the company in the market. But in FPO, the investors are aware as the company which is already listed on the stock exchange.
• Profit from IPO is higher than FPO and Profit from FPO lower than IPO.
• IPO is issued by an unlisted company whereas a listed company issues FPO.
• IPO is more expensive than FPO. FPO is cheaper in most cases because the value of the company is getting further diluted.
• IPO increases the share capital of the company because the company issues fresh capital to the public for listing. The number of shares of the company increases in dilutive FPO and remains the same in non-dilutive FPO.