The term of FPO is quite prevalent in the present time. However, there are many who are yet to have a clear view of this aspect. FPO stands for Follow-on Public Offer. This is a way through which the listed companies can raise capital. The money is raised from the public and is referred to as the further public offer. It can be said that it is the issuance of the stock for the supplement shares for a company. This method is such which is used not only by the private companies, but also by the public companies. This process takes place after the company has already established an exchange.
The issuance of the FPO
There are two ways through which the FPO can be issued by the companies. One of them is that of the fixed price issues, and the other one is that of the book building issues. Both the issue type is different with the underlying similarity of being a way of raising capital for the company. In the fixed price issue, the issues by the company are priced in a free way. The factors of quantity, as well as, quality are used to make sure that the price is justified. The other kind of process is such in which the demand for securities is made. The price of the issues is accessed on the basis of the bids that are obtained for the security. The bid is made on basis of the price range. The process of fixing the issue price is initiated after closing of the bid and finally the price is determined.
The benefits of obtaining the FPO
There are different kinds of benefits that are associated with an issuance of the FPOs by a company. The ROI or Return of Investment in this issuance is type is quite lucrative and thus to be beneficial for the investor. The investor is also able to avail better information on the invested FPOs. This is because in accordance with the guidelines of the market regulation the company has to present updated information. The best time to get hold of the FPO and to consider the investment is when the price of the stock can be availed at a discount, and it is lesser than that of the listed price.
The process involved
The process that is involved in offering of the FPO is quite easier. It is also not much complicated. There is no need for any kind of valuation work needed in this kind of offering. This is because the value is determined on basis of the firm’s stock in the market which was already published during the process of IPO. There is very less effort involved in the process which is attached with FPO.
Note on the regulatory requirements
If the company issuing the FPO has changed its name in a year, then it is a necessity that at least 50% of revenue that was generated was in the new name. Also, it is necessary to note that the size of the issue cannot be more than that of the five times of the net worth that is pre-issued.