Initial Public Offering (IPO)

Brief Definition

An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time and becomes a publicly traded company. This process allows the company to raise capital from public investors to fund expansion, pay off debt, or achieve other corporate goals.

Further Explanation

An Initial Public Offering (IPO) is the process by which a private company offers its shares to the public for the first time and becomes a publicly traded company. This process allows the company to raise capital from public investors to fund expansion, pay off debt, or achieve other corporate goals. During an IPO, the company works with investment banks to determine the offer price, number of shares to be sold, and the timing of the sale. Once the IPO is complete, the company’s shares are listed on a stock exchange, and anyone can buy and sell them.

Example:
A tech startup, previously funded by private investors, decides to go public to raise $100 million to develop new products and expand its market presence. It works with investment banks to set an initial share price at $20. When the IPO launches, the public can buy shares, and the company raises the desired capital. After the IPO, the startup’s shares trade on the stock exchange, allowing investors to buy and sell them.