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What is the difference between Right Issue and FPO?

FPO (Further Public Offering) and Right issue are the two ways to raise capital by issuing new shares by a listed company but both are different from each other in different means.

  1. Right Issue: When a company gives its existing shareholders the right to buy new shares at a fixed price generally lower than the current market price of a share is called the right issue.
  2. FPO: Once the company’s shares are listed on the exchange, after that, if the firm issues further additional shares in the market to the public is called FPO.

Things to know about Right Issue Vs FPO

  • The right issue gives existing shareholders the right to buy more shares of the company; however, both shareholders and non-shareholders can invest in FPOs to purchase additional shares.
  • Companies issue right shares to shareholders in the proportion to their shareholding while anyone can apply in FPOs at no maximum limit.
  • To subscribe to the right issue, an investor must have the firm’s share in the Demat account on the record date. Unlike it, there is no record date in FPOs, and investors can invest in FPO anytime during the subscription period.
  • Right issues are generally issued at a significant discount from the prevailing market price per share, however, FPOs are usually at the prevailing rates or minor discounts to not hurt existing shareholders' interests.
  • As only existing shareholders are allowed to subscribe to the right shares, therefore, the shareholding pattern does not change significantly.
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