IPO & FPO – What are they ?

Microsoft NZ

We hear the terms : IPO & FPO from time to time, especially in the stock market , and when a new major company is established.

Let’s define some terms first – that would make future explaining easier for us later :

– IPO: The short term of Initial Public Offering .

– FPO: The short term of Follow-up Public Offering .

Simple, isn’t it ? Let’s explain the terms more ..

Microsoft NZ

For companies who issue IPOs & FPs ; IPOs are more profitable than FPOs. It also comes before FPOs !! Yes, IPOs come first, and then come FPOs.

Companies ( mostly bigger ones ) , plan and issue an IPO to generate money from investors, while FPO serves for adding more cash to the initial public.

IPOS are projects held by a certain company, enabling investors ( individuals & corporates ) and common people with interest in stock markets and shares , to buy a certain % of the new shares the company is sending for sale in the stock market.

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So , when an investor buys 10,000$ of shares in IPO, and the company’s capital is 1,000,000 USD, he/she is gaining 0.1% part of the company , and so on ..

Generally speaking ; profits generated ( mostly ) are higher in IPO VS FPO, and so are losses.

That is because , when investing in an IPO;  there are no information about the coming share situation, and how the share would re-act in the coming times.

While , when investing in FPO, that is a follow-up public offering, the corporate is lacking cash, but also has to publish its performance and financial numbers to the public , and analyzers can review them and decide – to the nearest possible level – how the share would act in the future times, and should an investment be done to it or not !!

Having historical information also means that share’s price won’t change much ( upper & less ) , this reduces profits more than IPOs.

FPO is risky too , since when a corporate starts an IFP, it means it needs extra cash – and that is risky in the business world.

At last, IPO & FPO have benefits and risks related to each, and you should be careful .. Have a say ? Let’s hear from you in this form.



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