IPO vs. FPO — What's the Difference?

An IPO, or Initial Public Offering, is a critical event for a private company intending to go public, allowing it to sell its shares to the public for the first time. In contrast, an FPO, or Follow-on Public Offering, occurs when a company that is already publicly listed decides to issue additional shares to raise capital, often for expansion, debt reduction, or other corporate purposes.

The IPO serves as a gateway for private companies to access public capital markets, often marking a pivotal moment in a company’s lifecycle. On the contrary, an FPO is not about debuting in the stock market but rather about leveraging the existing status to procure additional funds, allowing the already public company to further its business objectives.

While IPOs are significant for setting the initial market price of the company’s shares, based on investor demand and perception of the company’s value, FPOs do not have the same impact on share pricing. The market price in an FPO is typically already influenced by the existing share performance and market conditions.

In the context of investor opportunities, an IPO often attracts considerable attention as it presents a chance to buy the company’s shares at the initial offering price, potentially gaining from future growth. In contrast, FPOs may not generate the same level of excitement, but they still provide an opportunity for investment in a company whose performance can be evaluated based on its track record in the public market.

In essence, while both IPO and FPO are instrumental in capital raising, they occur at different stages in a company’s journey with IPO marking the transition from private to public and FPO occurring subsequently when additional capital is needed.