About Follow on Public Offer (FPO):
- What is it? FPO is a process wherein a company already listed on a stock exchange issues new shares to existing investors or shareholders.
- It is also known as a secondary offering.
- FPO allows a company to raise additional funds through the issuance of new shares.
- Companies use FPOs to diversify their equity base and raise capital for business.
- This capital can be used for multiple purposes, such as to meet the company's expenses, business expansion, debt reduction, etc.
- Types of FPO:
- Dilutive FPO:
- It is when a company issues additional shares and offers them to the public.
- It increases the number of outstanding shares of the company.
- As the number of shares increase, the earnings per share (EPS) decrease.
- Funds raised from such an FPO are allocated for expansion activities or to pay debts.
- Non-dilutive FPO:
- It is when shares that are already in existence are issued to the public.
- It is when existing shareholders, like directors or founders, sell their shares and offer them to the public.
- Non-dilutive FPOs are used to change the shareholding ownership.
- At-the-market offering:
- It is a type of FPO in which a company offers secondary public shares on any given day to raise capital, mostly depending on the prevailing market price.
- An at-the-market (ATM) offering gives the issuing company the ability to raise capital as needed.
What is Initial Public Offer (IPO)?
- When a private company first sells shares of stock to the public, this process is known as an initial public offering (IPO).
- An IPO means that a company's ownership is transitioning from private ownership to public ownership.
Q1) What is Rights issue?
A rights issue is an invitation to existing shareholders to purchase additional new shares in the company. In a rights offering, each shareholder receives the right to purchase a pro-rata allocation of additional shares at a specific price and within a specific period