Initial Public Offering (IPO) is when a company raises funds by allotting its shares to the general public for the first time. The primary difference between IPO and FPO is when an entity approaches the public to sell its shares for the first time it’s called an IPO and when a company issues share for consecutive times it is called a Follow-on Public Offering.

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Main differences between IPO and FPO

Meaning: IPO is the first time issue of shares by unlisted companies through subscription and FPO is issuance of shares by a company for the second, third or consecutive time to raise additional capital after its IPO.

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Price: In an IPO, we have a fixed price for the share sale which is decided by the merchant banker and the company during the filing process. While in an FPO, the price of shares is market-driven or determined by the number of shares being increased or decreased.

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Objective: The objective of an IPO is to raise capital through opening up ownership of shares in the company to the public whereas FPO is issued to diversify public ownership or to dilute the ownership of shareholders or promoters.

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Risk: Investing in an IPO is relatively riskier than FPO as there is more transparency and information available about the company, its financials, performance over time.

Types: In an IPO there are equity and preference shares while in an FPO there are dilutive and non-dilutive shares.

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Cost: IPOs are more expensive to carry out as compared to FPOs. FPOs are cheaper because the value of the company listing its shares is getting diluted further.

Since there is no particular method of knowing how an IPO is going to perform but we can learn about the company’s prospects and fundamentals through this we can make a well-informed decision. In an FPO, a well-analyzed decision can be made as more information about the company is available and how is likely to deliver.