What is a ‘Follow On Public Offer – FPO’
A follow-on public offer (FPO) is an issuing of shares to investors by a public company that is already listed on an exchange. It is an issuance of stock subsequent to the company’s initial public offering. An FPO is essentially a stock issue of supplementary shares made by a company that is already publicly listed and has gone through the IPO process. FPOs are popular methods for companies to raise additional equity capital in the capital markets through a stock issue.
Types of Follow-On Public Offers – FPO
There are mainly two types of follow-on public offers. The first type is dilutive to investors, as the company’s Board of Directors agrees to increase the share float level. This type of follow-on public offering seeks to raise money to pay debt or expand the business. This helps increase the number of shares outstanding.
The other type of follow-on public offer is non-dilutive. This approach is used when directors or large shareholders sell privately held shares. This is non-dilutive, as no additional shares are sold. This method is commonly referred to as a secondary market offering. There is no benefit to this method for the company or current shareholders.
Knowing that there are two main types of follow-on public offers, and knowing the different effects they have, makes it incredibly important to pay attention to the identity of the sellers on offerings. Investors can tell from this whether or not the offering will be dilutive