Learn the meaning and difference between IPO, FPO, Dividend, and Right Share. Get simple explanations of these key stock market terms to boost your financial knowledge in 2025.
What is an IPO (Initial Public Offering)?
An IPO is when a private company offers its shares to the public for the first time to raise capital. It is listed on a stock exchange, such as NASDAQ, NYSE, or NEPSE.
✅ Key Points about IPO:
- IPO stands for Initial Public Offering.
- It allows public investment and company expansion.
- IPOs are often priced attractively to attract investors.
After an initial public offering (IPO), the company becomes publicly traded.
📌 Example: In 2021, Robinhood launched its IPO, making its shares available to public investors.
What is an FPO (Follow-on Public Offering)?
An FPO is a process through which an already listed company issues additional shares to the public to raise more funds.
✅ Key Points about FPO:
- FPO is also called a Secondary Offering.
- Issued after IPO by already listed companies.
- Used to finance expansion, repay debt, or support new projects.
- Prices may be close to market value.
📌 Example: A company listed in 2020 may offer an FPO in 2023 to raise more money for growth.
What is a Dividend?
A dividend is the portion of a company’s profit shared with shareholders as a reward for investing in the company.
✅ Key Points about Dividend:
- Can be paid as cash or bonus shares.
- Issued by profit-making companies.
- Not mandatory, but often a sign of a strong company.
Frequency: Annually, Semi-annually, or Quarterly.
📌 Example: If you hold 100 shares and the company announces a $5 dividend per share, you earn $500.
What is a Right Share?
Right Shares are shares offered by a company to its existing shareholders at a discounted rate before offering them to the general public.
✅ Key Points about Right Shares:
- Issued only to existing shareholders.
- Offered at a discounted price.
- Helps raise funds without taking loans.
Shareholders may choose to buy or ignore the offer.
📌 Example: If you own 10 shares, and the company offers a 1:2 rights issue at a 20% discount, you can buy 5 more shares at the lower price.
Comparison Table: IPO vs FPO vs Dividend vs Right Share
Conclusion:
Understanding terms like IPO, FPO, Dividend, and Right Share is essential for anyone stepping into the world of investment. These concepts form the foundation of how companies raise money and reward their investors. Whether you’re a new investor or just exploring financial knowledge, this guide gives you clarity and confidence in understanding stock market essentials.
Ready to take your first step into the world of investing?
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