Understand IPOs

When a company is willing to go public, it needs to secure the services of an underwriter. These kinds of services are provided by investment banks. In the next step, the company is asked to file an application which leads the launching of its IPO. After this the company will prepare and announce a document known as the red herring prospectus. This document contains important information about the company, its business, its revenue and income over the last few years, its important shareholders, its management and more.


IPO stands for initial public offer. It is the first time a company goes public and be available for everybody to buy, sell or trade on its stocks. After the IPO is completed, a company is listed on a stock exchange. It happens that the company, after being already an IPO, they want to raise money from the general public, so they offer some shares for sale to the public.

This kind of shares offering is called FPOs. FPOs stands for Follow on Public Offers. So, the very first stock sale of a company to the public is known as an IPO, all other sales coming after are called FPOs.

There are two types of FPO. One, which leads to the increase number of the stocks in the market. In this case the company itself decide to sell more shares of the company and raise its value. Two, which doesn’t lead to the increase number of the stocks in the market, the number remains the same. The shareholders which possess a large number of stocks sell it to other participants. So, stocks move hand to hand.