Initial Public Offering - IPO

AAA

DEFINITION of 'Initial Public Offering - IPO'

The first sale of stock by a private company to the public. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

In an IPO, the issuer obtains the assistance of an underwriting firm, which helps it determine what type of security to issue (common or preferred), the best offering price and the time to bring it to market.

Also referred to as a "public offering."

INVESTOPEDIA EXPLAINS 'Initial Public Offering - IPO'

IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company. Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.

Embark on the interesting journey from the pre-IPO stage to the final IPO placement in the primary market - Read The Road to Creating an IPO and Interpreting a Company's IPO Prospectus Report.

VIDEO

RELATED TERMS
  1. Venture-Capital-Backed IPO

    The selling to the public of shares in a company that has previously ...
  2. Pre-IPO Placement

    When a portion of an initial public offering (IPO) is placed ...
  3. IPO ETF

    An exchange-traded fund that focuses on stocks that have recently ...
  4. Tombstone

    A written advertisement placed by investment bankers in a public ...
  5. Oversubscribed

    A situation in which the demand for an initial public offering ...
  6. Public Offering Price - POP

    The price at which new issues of stock are offered to the public ...
RELATED FAQS
  1. What are the most unsuccessful tech IPOs of all-time?

    Learn about theGlobe.com, eToys, Shanda Games and Vonage, some of the most unsuccessful tech IPOs of all time, and why their ...
  2. What are the different types of IPO issued?

    Learn about the two ways for a company to go public: fixed price and book building. Under fixed price, the share price is ...
  3. What is the difference between private equity and venture capital?

    Learn the differences between private equity and venture capital, especially in terms of how these types of firms invest ...
  4. Who can get access to a highly anticipated IPO?

    Purchasing a highly anticipated initial public offering may seem like a sound investment strategy, but most individual investors ...
  5. What is the difference between an IPO and a seasoned issue?

    Learn how companies issue IPO securities when they first go public and seasoned issue shares if they sell more shares in ...
Related Articles
  1. Fundamental Analysis

    How The Sarbanes-Oxley Era Affected IPOs

    After the infamous collapse of companies like Tyco, Enron and WorldCom, the government responded to try and prevent it from happening again.
  2. Investing Basics

    A Look At Primary And Secondary Markets

    Knowing how the primary and secondary markets work is key to understanding how stocks trade.
  3. Investing Basics

    The Road To Creating An IPO

    Through an Initial Public Offering, or IPO, a company raises capital by issuing shares of stock, or equity in a public market. Generally, this refers to when a company issues stock for the first ...
  4. Mutual Funds & ETFs

    Investing In IPO ETFs

    Learn the history, rules and risks of investing in IPO exchange-traded funds.
  5. Investing

    5 Tips For Investing In IPOs

    Thinking of investing in IPOs? Here are five things to remember before jumping into these murky waters.
  6. Investing

    How An IPO Is Valued

    The initial valuation of an IPO can determine the success or failure of a specific stock - but how is that price determined?
  7. Personal Finance

    The Ups And Downs Of Initial Public Offerings

    Initial public offerings aren't the best option for every company. Consider these factors before "going public."
  8. Investing Basics

    IPO Lock-Ups Stop Insider Selling

    Ownership plays a key role when companies go public. Find out how.
  9. Retirement

    IPO Basics Tutorial

    What's an IPO, and how did everybody get so rich off them during the dotcom boom? We give you the scoop.
  10. Investing

    Additional Paid-In Capital

    Additional paid-in capital is an account in the equity section of a balance sheet. It represents the additional amount paid for the company’s shares over the par value of the shares. Additional ...

You May Also Like

Hot Definitions
  1. Prepaid Expense

    A type of asset that arises on a balance sheet as a result of business making payments for goods and services to be received ...
  2. Gordon Growth Model

    A model for determining the intrinsic value of a stock, based on a future series of dividends that grow at a constant rate. ...
  3. Cost Accounting

    A type of accounting process that aims to capture a company's costs of production by assessing the input costs of each step ...
  4. Law Of Supply

    A microeconomic law stating that, all other factors being equal, as the price of a good or service increases, the quantity ...
  5. Investment Grade

    A rating that indicates that a municipal or corporate bond has a relatively low risk of default. Bond rating firms, such ...
  6. Fringe Benefits

    A collection of various benefits provided by an employer, which are exempt from taxation as long as certain conditions are ...
Trading Center