Follow On Public Offer

Follow On Public Offer:

Adani Enterprises recently decided to call off its ₹20,000 crore follow-on public offer and return the money it had collected from investors.

• FPO is a process wherein a company already listed on a stock exchange issues new shares to existing investors or shareholders.
• It is also known as a secondary offering.
• FPO allows a company to raise additional funds through the issuance of new shares.
• Companies use FPOs to diversify their equity base and raise capital for business.
• This capital can be used for multiple purposes, such as to meet the company’s expenses, business expansion, debt reduction, etc.
• Types of FPO:
  • Dilutive FPO:
    • It is when a company issues additional shares and offers them to the public.
    • It increases the number of outstanding shares of the company.
    • As the number of shares increase, the earnings per share (EPS) decrease.
    • Funds raised from such an FPO are allocated for expansion activities or to pay debts.
  • Non-dilutive FPO:
    • It is when shares that are already in existence are issued to the public.
    • It is when existing shareholders, like directors or founders, sell their shares and offer them to the public.
    • Non-dilutive FPOs are used to change the shareholding ownership.
  • At-the-market offering:
    • It is a type of FPO in which a company offers secondary public shares on any given day to raise capital, mostly depending on the prevailing market price.
    • An at-the-market (ATM) offering gives the issuing company the ability to raise capital as needed.