IPO (Initial Public Offering)
The process by which a private company offers shares to the public for the first time.
Definition
An Initial Public Offering (IPO) is the process through which a private company becomes publicly traded by offering its shares to investors on a stock exchange for the first time. Companies pursue IPOs to raise capital for growth, provide liquidity for early investors and employees, and increase public visibility. The IPO process involves selecting investment banks as underwriters, filing a registration statement (S-1) with the SEC, conducting a roadshow to attract investors, and pricing the shares. IPO stocks can be volatile in their early trading days. The "IPO pop" refers to the common first-day price increase. Lock-up periods (typically 90-180 days) prevent insiders from selling immediately after the IPO.
Related Terms
Stock
A share of ownership in a company that represents a claim on part of its assets and earnings.
InvestingMarket Capitalization
The total market value of a company's outstanding shares of stock.
MarketsBlue-Chip Stock
Shares of large, well-established, financially sound companies with a history of reliable performance.