what is ipo in stock market

An IPO, or Initial Public Offering, is the process of offering shares of a private corporation to the public in a new stock issuance for the first time. It is when a private company becomes public by selling its shares on a stock exchange. In essence, an IPO means that a companys ownership is transitioning from private ownership to public ownership. Companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an IPO. An IPO allows a company to raise equity capital from public investors, which can be used to fund projects, pay down debt, and help the business expand operations. The transition from a private to a public company can be an important time for private investors to fully realize gains from their investment as it typically includes a share premium for current private investors. Meanwhile, it also allows public investors to participate in the offering. Companies hire investment banks to market, gauge demand, set the IPO price and date, and more. Once the company and its advisors have set an initial price for the IPO, the underwriter issues shares to investors, and the companys stock begins trading on a public stock exchange, like the New York Stock Exchange (NYSE) or the Nasdaq.