A follow-on public offering, or FPO, is a method by which companies that are already listed on the stock exchange issue shares to the public. It is not the same as an IPO, which occurs when a firm first offers its shares to the public.
Types of FPO
There are two options for a firm to conduct a follow-on public offering:
Dilutive
Dilutive FPO refers to a new share offer that raises the company’s total outstanding shares.
The company’s board of directors releases fresh shares for public sale. The corporation uses an FPO to support expansion efforts or pay off debts. The ITI Ltd. FPO is a recent example of a dilutive FPO in the Indian stock market.
Indian Telecom Industries Ltd., or ITI, is a Bangalore-based telecom manufacturing firm. It is a public firm.
ITI has offered a fresh offering of 18 crore shares at a price range of Rs 71 to 77 per share. This was done to enhance the public shareholding while diluting the government’s position in the corporation, which was more than 85% in January.
However, later in February 2020, ITI withdrew its FPO, citing current market conditions.
Non-dilutive
Non-dilutive, as the name implies, does not dilute existing shareholdings. The shares issued in a non-dilutive IPO are already in circulation. This means that the directors or the larger shareholders sell their shares and make them available to the public.
The non-dilutive FPO provides no material benefits to the corporation. It is typically used to modify the shareholding ownership arrangement.
