Initial Public Offering - IPO

Loading the player...

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."

BREAKING DOWN '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.

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. Public Offering Price - POP

    The price at which new issues of stock are offered to the public ...
  6. Oversubscribed

    A situation in which the demand for an initial public offering ...
Related Articles
  1. Stock Analysis

    Moderna Therapeutics: An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when highly valued biotech company Moderna Therapeutic files for an initial public offering (IPO).
  2. Retirement

    Ipsy Review: Is It Worth It?

    Discover the history of ipsy, how much packages cost, options available for membership, major competition and what the future looks like for the company.
  3. Stock Analysis

    GoDaddy Inc: How It's Fared Since the 2015 IPO (GDDY)

    Evaluate GoDaddy's stock performance since its April 2015 IPO, and determine how you would have fared had you invested in the company on day six.
  4. Stock Analysis

    If You Had Invested Right After Comcast's IPO (CMCSA)

    Evaluate how Comcast's stock has performed since the company's 1972 IPO, and learn how you might be a millionaire today had you invested a small sum in the IPO.
  5. Stock Analysis

    If You Had Invested Right After AT&T's IPO (T)

    Analyze how AT&T stock has performed after the company's 1984 IPO, and learn how you would have fared had you been an early investor.
  6. Fundamental Analysis

    The Biggest Private Oil Companies in the World

    Discover the largest private oil companies in the world, as ranked according to the average barrels of oil per day (B/D) that they produce.
  7. Stock Analysis

    TransUnion - How It's Fared Since the 2015 IPO (TRU)

    Learn about the business of financial services company TransUnion and how the company's stock fared after its initial public offering in 2015.
  8. Stock Analysis

    The Top 5 Small Cap Healthcare Stocks for 2016 (SMED, SAGE)

    Get valuable information on five top small cap health care stocks that offer excellent potential to outperform for investors in 2016.
  9. Stock Analysis

    AppNexus - An IPO Candidate in 2016?

    Find out the reasons why 2016 may be the year when the hot ad tech company, AppNexus, finally files for an initial public offering.
  10. Investing News

    Predicting the Biggest IPO of 2016

    Find out which tech startup company will bring life back to the struggling IPO market with the biggest initial public offering in 2016.
RELATED FAQS
  1. When did Facebook go public? (FB)

    Facebook, Inc. (NASDAQ: FB) went public with its initial public offering (IPO) on May 18, 2012. With a peak market capitalization ... Read Full Answer >>
  2. Can mutual funds invest in IPOs?

    Mutual funds can invest in initial public offerings (IPOS). However, most mutual funds have bylaws that prevent them from ... Read Full Answer >>
  3. What kind of assets can be traded on a secondary market?

    Virtually all types of financial assets and investing instruments are traded on secondary markets, including stocks, bonds, ... Read Full Answer >>
  4. How can I invest in electronic retailing (e-tailing)? (AMZN, W)

    Electronic retail is one of the fastest growing segments of the economy. Every year, more people are choosing to purchase ... Read Full Answer >>
  5. Why would a company decide to utilize H-shares over A-shares in its IPO?

    A company would decide to utilize H shares over A shares in its initial public offering (IPO) if that company believes it ... Read Full Answer >>
  6. How can an investment banker switch to a career in corporate finance?

    It's pretty easy for an investment banker to switch to a career in corporate finance. The career skills are easily transferable, ... Read Full Answer >>
  7. How do I place a buy limit order if I want to buy a stock during an initial public ...

    During an initial public offering, or IPO, a trader may place a buy limit order by choosing "Buy" and "Limit" in the order ... Read Full Answer >>
  8. What are the main benchmarks that track the performance of the Internet sector?

    The main benchmarks that track the performance of the Internet sector are the Nasdaq Composite Index, the First Trust Dow ... Read Full Answer >>
  9. What are the tax implications for both the company and investors in a divestiture ...

    In finance, divestiture is defined as a reduction of a company's assets as a result of asset closures or the selling of business ... Read Full Answer >>
  10. What type of companies use downround financing?

    Down round financing involves selling stock to new investors at a lower price than the investors paid. Shares for the company ... Read Full Answer >>
  11. What are the differences between downround and upround financing?

    Down rounds and up rounds of financing refer to the pre-money, or pre-investment, valuation of a company prior to a round ... Read Full Answer >>
  12. What are the advantages and disadvantages of listing on the Nasdaq versus other stock ...

    The primary advantages for a company of listing on the Nasdaq exchange are lower listing fees and lower minimum requirements ... Read Full Answer >>
  13. Why is the Nasdaq more heavily weighted to tech stocks than other stock exchanges?

    The Nasdaq became the world's first electronic stock exchange at its inception in 1971. The exchange's dedication to advancing ... Read Full Answer >>
  14. How can I buy shares in the primary market?

    If you want to buy shares in the primary market, you need to either be part of a syndicate or one of the lucky few whose ... Read Full Answer >>
  15. What are some of the key reasons a large corporation might prefer to remain a private ...

    The initial public offering (IPO) is often a rite of passage for large corporations. The lure of going public with an offering ... Read Full Answer >>
  16. Who are General Motors' (GM) main suppliers?

    General Motors Co. (GM) has a long list of over 70 suppliers. Among the major suppliers of component parts to GM are NGK ... Read Full Answer >>
  17. Why is Manchester United (MANU) carrying so much debt?

    The takeover of Manchester United by the Glazer family beginning in 2005 saddled the historic club with substantial amounts ... Read Full Answer >>
  18. How does the strength of the IPO market affect the drugs sector?

    The strength in the IPO market is an important indicator of liquidity, risk appetite and innovation in the drugs sector. ... Read Full Answer >>
  19. What is the average range for the price-to-earnings ratio in the electronics sector?

    Investors purchase shares of company stock and other traded securities through capital markets in either primary or secondary ... Read Full Answer >>
  20. What is the difference between a primary and secondary financial market?

    Primary and second financial markets describe two different types of marketplaces where investors and traders buy and sell ... Read Full Answer >>
  21. What is Apple's current mission statement and how does it differ from Steve Job's ...

    Apple's current mission statement is "Apple designs Macs, the best personal computers in the world, along with OS X, iLife, ... Read Full Answer >>
  22. What are the primary differences between a closed end investment and an open end ...

    The primary differences between closed-end funds and open-end funds lie in how they are structured and how they are bought ... Read Full Answer >>
  23. How does debt-to-capital change when a company issues new shares of stock?

    The debt to capital of a company changes when it issues new shares of stock by decreasing its amount of total debt in relation ... Read Full Answer >>
  24. What are some roles of an investment bank?

    Investment banks serve a number of purposes in the financial and investment world, including underwriting of new stock issues, ... Read Full Answer >>
  25. What are some popular mutual funds that give exposure to the drugs sector?

    The pharmaceutical industry has experienced outstanding growth in the 10 years leading up to 2015, consistently outperforming ... Read Full Answer >>
  26. What are the pros and cons of using the S&P 500 as a benchmark?

    The Standard & Poor's 500 Index is the most commonly used benchmark for determining the state of the overall economy. ... Read Full Answer >>
  27. What are the different equity financing options available to companies in the United ...

    Finding and attaining affordable financing is an ongoing challenge for most businesses within the United States. Debt financing ... Read Full Answer >>
  28. How did Jeff Weiner get the idea for LinkedIn?

    Jeff Weiner did not actually found LinkedIn or have the idea of starting it. As of March 2015, he has been serving as CEO ... Read Full Answer >>
  29. What lessons did the tech bubble crash give to investors in the Internet sector?

    The tech bubble crash taught investors that despite their efforts to provide an influx of cash into a rapidly growing market, ... Read Full Answer >>
  30. What are the most unsuccessful tech IPOs of all-time?

    Some of the most unsuccessful tech initial public offerings (IPOs) of all time include theGlobe.com, eToys, Shanda Games ... Read Full Answer >>
  31. What are the different types of IPO issued?

    An initial public offering, or IPO, is the way a firm goes public and sells shares to raise financing. It is one of the investing ... Read Full Answer >>
  32. What is the difference between private equity and venture capital?

    Private equity is sometimes confused with venture capital because they both refer to firms that invest in companies and exit ... Read Full Answer >>
  33. Who can get access to a highly anticipated IPO?

    The frenzy that surrounds a company's highly anticipated initial public offering (IPO) can be enticing to individual investors, ... Read Full Answer >>
  34. What is the difference between an IPO and a seasoned issue?

    When a privately owned organization decides to raise capital by offering shares of stock or debt securities to the public ... Read Full Answer >>
Hot Definitions
  1. Discouraged Worker

    A person who is eligible for employment and is able to work, but is currently unemployed and has not attempted to find employment ...
  2. Ponzimonium

    After Bernard Madoff's $65 billion Ponzi scheme was revealed, many new (smaller-scale) Ponzi schemers became exposed. Ponzimonium ...
  3. Quarterly Earnings Report

    A quarterly filing made by public companies to report their performance. Included in earnings reports are items such as net ...
  4. Dark Pool Liquidity

    The trading volume created by institutional orders that are unavailable to the public. The bulk of dark pool liquidity is ...
  5. Godfather Offer

    An irrefutable takeover offer made to a target company by an acquiring company. Typically, the acquisition price's premium ...
Trading Center