What is Initial Public Offering?
The first time a private company offers its shares to the public on a stock exchange to raise capital.
An Initial Public Offering (IPO) is the process through which a privately held company transforms into a public company by offering its shares to the general public for the first time. This is a primary way for a company to raise significant equity capital from a wide pool of investors. The funds raised are often used for expansion, research, debt repayment, or other corporate purposes.
The IPO process involves investment banks (underwriters) who help determine the initial offering price, buy the shares from the company, and sell them to institutional and retail investors. Once the shares are sold in the IPO, they begin trading on a secondary market, like the NYSE or Nasdaq, where their price is set by market demand. IPOs are high-profile events that carry risks, as the stock's initial trading can be volatile.