FPO vs IPO: Know the Differences Between FPO and IPO
- Published Date: August 03, 2023
- Updated Date: August 29, 2025
- By Team Choice
If you are exploring the stocks market for the first time, you must have come across terms like IPO and FPO. Although both processes are considered ways to raise capital by issuing shares, they serve different purposes.
An IPO is a private company's initial sale of shares to the public, while an FPO is the sale of extra shares by a company that is already publicly traded. Understanding the difference between these processes is crucial for investors.
This blog will explore the difference between FPO and IPO to help you make more informed decisions.
FPO vs IPO: Key Differences
Here are some of the major differences between FPO and IPO:
| Basis | IPO (Initial Public Offering) | FPO (Follow-on Public Offering) |
|---|---|---|
| Meaning | An IPO is the very first instance when a private company offers its shares to the public and becomes a publicly traded entity. | An FPO takes place after a company is already listed on the stock exchange and wishes to raise more funds by issuing additional shares. |
| Purpose | The primary purpose of an IPO is to raise capital for the first time, enabling the company to expand its funds, meet working capital needs, or repay initial debts. | The main purpose of FPO is to raise extra capital after the IPO. Companies use the capital for expanding operations, repaying debts, or making acquisitions. |
| Price Determination | For IPOs, the price is determined either as a fixed price or through book-building, where a price range is given and investors bid within that range. | FPO pricing is generally determined by the company’s existing market value and the level of demand. Prices may be lower than the current market rates to encourage participation. |
| Share Quantity | Since new shares are issued for the first time, IPOs tend to increase the total number of outstanding shares. | The outcome of the share quantity depends on the FPO type. Dilutive FPOs increase share count by issuing new shares, while non-dilutive FPOs don’t, as promoters sell their existing shares. |
| Cost Involved | Announcing an IPO is an expensive affair. It involves underwriters, regulatory filings, marketing (roadshows), and heavy compliance. | FPOs are cost-effective since the company is already listed and the process is more straightforward. |
| Timing | IPOs represent a company’s transition from private to public ownership. | FPOs occur only after the company has completed its IPO and is already trading in the secondary market. |
| Risks for Investors | IPO investments carry higher risks because there is no past performance or trading history to evaluate the company’s real worth. | FPOs are less risky. Investors can study the company’s financial history, reputation, and past market performance before investing. |
| Company Status | An IPO is announced by a company that’s not listed on any stock exchange. | An FPO is carried out by a company that is already listed and has a track record in the market. |
| Process & Compliance | IPOs require strict legal formalities, disclosures, approvals from regulators, and detailed compliance, making the process lengthy and complex. | FPOs, while still regulated, are simpler, as much of the groundwork (listing, compliance history) is already in place. |
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Which is Better: IPO or FPO?
As both IPOs and FPOs aim to raise funds by issuing shares, many individuals often wonder which offers a better investment opportunity. The answer to this question heavily depends on your investment style and risk tolerance.
- Investing in an IPO can be a rewarding opportunity if the company grows significantly after going public. However, it is crucial to remember that IPOs carry higher uncertainty since there is no past market performance to rely on.
- FPO investments are often considered safer, as the investors can analyse the company’s track record, financials, and market reputation before investing.
If you are an aggressive investor who is willing to take risks for potentially higher rewards, investing in IPOs may suit you better.
If you are a conservative investor looking for safe investments with available data to analyse, FPOs are generally a better choice.
You can even consider investing in both IPOs and FPOs, depending on the market cycle and specific company potential.
Disclaimer: The provided information is intended for general knowledge only. It should not be construed as financial advice. It is advisable to consult a SEBI-registered professional or investment advisor before making any investment decision. You should also conduct your own research before investing.
Also read: Is IPO Safe or not
Summing Up
Both IPO and FPOs are crucial fundraising tools for companies and investment opportunities for the public. An upcoming IPO allows you to be part of a company’s growth story from the start, whereas an FPO provides a chance to invest in an already-listed business with a proven record. Understanding the difference between FPO and IPO can help you align your investment choices with your financial goals and risk tolerance.
FAQs
What is the full form of IPO and FPO?
The IPO’s full form is Initial Public Offering, and FPO’s full form is Follow-on Public Offering.
Can retail investors apply for IPO and FPOs as well?
Yes, retail investors can use their trading and Demat account to participate in both IPOs and FPOs.
Which is riskier: IPO or FPO?
An IPO is generally riskier since the company lacks a public track record, but an FPO is considered safer because it has a performance history.
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