what are ipos

An IPO, or initial public offering, is the first time a privately held business sells shares of its stock to the public. It is a fundraising method used by large companies to raise capital from public investors by offering shares through the primary market. IPOs provide companies with an opportunity to obtain capital for future growth, repayment of debt, or working capital. The process of an IPO involves a private company transitioning from private ownership to public ownership. The company sells shares of its stock to institutional investors and usually also to retail investors. IPOs are typically underwritten by one or more investment banks, who also set the IPO price and date, and more. When a company lists its securities on a public exchange, the money paid by the investing public for the newly issued shares goes directly to the company (primary offering) as well as to any early private investors who opt to sell all or a portion of their holdings (secondary offerings) as part of the larger IPO. An IPO allows a company to tap into a wide pool of potential investors to provide itself with capital for future growth, repayment of debt, or working capital. IPOs can be risky for investors, but thorough research, small investments, and smart asset allocation can mitigate those risks.