Follow on Public Offer

Companies can raise capital through public subscription through an IPO and also through an FPO or Follow on Public Offer.

FPO or Follow up Public Offer is a process where the company invites public subscription to raise additional capital after successfully completing an IPO (Initial Public Offer). An FPO may be issued by the company after a few years of the IPO issue. This is generally to meet their revised capital requirements, debt reduction, etc.

Types of FPOs

FPO can be used only by companies that are already listed on stock exchanges.

Some of the FPOs that a company can opt for include:
a. Non-dilutive FPO – Existing shareholders offer their stake for sale and the proceeds are directly received by them. There is no change in the overall stock and EPS of the company.
b. Dilutive FPO – Under this FPO, additional shares are issued to increase the share capital resulting in a fall in the EPS.
c. At the market FPO – Under this type of FPO, the company raises funds at the prevailing market price. If the market price of the company’s shares drops significantly, the company has the option to back out of the FPO.