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What is Follow on Public Offer (FPO)?
Follow on public offer, also called an FPO, is a way through which companies that are listed on a stock exchange issue fresh shares to the public. FPO is different from an IPO, or initial public offering, as through the latter, companies offer their shares to the public for the first time, before it is listed on a stock exchange.
When does a company issue FPO?
When does a company issue FPO?
A company generally issues FPO when it wants to raise more money by issuing new shares to pay its debts, finance new projects or for its corporate expenses among other things. The issue price for an FPO is generally lower than the current market share price of the company.
By FPO, a company also increases their equity base, giving investors more opportunities to invest in the firm. Through an FPO, existing shareholders can increase their stake in the company as well as new investors can buy shares at a lower price.
Types of FPOs
There are two types of FPOs; a) diluted, and b) non-diluted.
Diluted FPO
In diluted follow-on offering, the new offer of shares increases the outstanding shares of the company. A new set of shares are issued to the public through diluted FPO to raise the capital for funding new projects, and activities or for paying debts.
Non-Diluted FPO
Non-diluted follow-on offerings are issued when existing shareholders of the company sell their stocks to the public. Non-Diluted FPOs are also known as secondary market offerings.
Non-Diluted FPOs do not benefit the company in terms of raising more capital as these are generally issued to change the shareholding ownership pattern.
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Even though AEL's share price continued to languish below its issue price, FPO managed to garner 1.12 times subscription, attracting bids worth over Rs 16,000 cr