What is Follow on Public Offering?
A Follow-On Public Offering (FPO), also known as a secondary offering or seasoned equity offering (SEO), is a process through which a publicly traded company issues additional shares of its stock to the public after its initial public offering (IPO).
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In an FPO, the company that’s already listed on a stock exchange, offers more shares to investors in order to raise additional capital.
Follow-on Public Offer (FPO): How It Works
Companies undertake Follow-on Offering for various reasons:
1- Financing Needs: If a company needs additional capital to fund its growth plans, it might opt for an public offering.
2- Market Conditions: If the stock market is performing well and there is demand for the company’s shares, it might be an opportune time to conduct an FPO.
3- Liquidity for Existing Shareholders: In some cases, existing shareholders, such as company founders or early investors, might want to sell some of their shares to unlock value and gain liquidity.
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What is the Process of FPO?
The process of conducting an FPO involves several steps:
- Planning: The company and its advisors determine the number of shares to be offered and the offering price.
- Regulatory Filings: The company files necessary regulatory documents with the relevant securities regulator, providing information about the Follow-on Offering , the company’s financials, and its intended use of the funds.
- The process of follow on public offer and its underwriters marketer of potential investors generates interest and demand.
- Book Building: This is the process of determining the final offering price by collecting and analyzing bids from potential investors.
- Pricing and Allocation: Once the offering price is determined, the shares are allocated to investors based on their bids and the overall demand.
- How is it done? The FPO is closed, and the newly issued shares are listed and Shares are traded on the stock exchange.
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Follow-on Offering : Future Impact on stock prices and company growth
The impact of an FPO can vary based on the company’s performance, the market’s response, and the company’s use of the raised funds. Potential impacts include:
- Capital Infusion
- Dilution
- Liquidity
Here’s a simplified table summarizing the key details of Power Grid Corporation of India’s FPO (Follow-On Public Offering) that took place from November 9 to November 12, 2010:
| FPO Details | |
| Listing Date | November 25, 2010 |
| Price Range per Share | ₹85 to ₹90 |
| Lot Size | 65 Shares |
| Total Issue Size | 841,768,246 shares |
| Total Issue Size (Value) | ₹7,442 Crores |
| Issue Type | Book Built Issue FPO |
| Distribution of Shares | |
| QIB Shares Offered | 419,189,323 shares (49.80%) |
| NII (HNI) Shares Offered | 125,756,797 shares (14.94%) |
| Retail Shares Offered | 293,432,526 shares (34.86%) |
| Employee Shares Offered | 3,389,600 shares (0.40%) |
| Total Shares Offered | 841,768,246 shares (100%) |
| Objects of the Issue |
| 1. Disinvestment |
| 2. Capital Requirements |
| 3. General Corporate Purposes |
This FPO aimed to achieve disinvestment of government-held shares, raise capital for specific transmission projects, and serve general corporate purposes
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