What Is an IPO?
IPO means initial public offering. It is the first time a private company sells its shares to the public on a stock exchange. After the IPO, anyone can buy its stock.
How an IPO works
Before an IPO, a company is owned by its founders, staff and early investors. Banks help the company set a price and find big buyers. On IPO day, the shares start trading under a new ticker, and the price can move a lot in the first hours.
Why would a company do an IPO?
- To raise money. New shares bring in cash to grow the business or pay off debt.
- To let early owners sell. Founders and early investors can turn their shares into cash.
- To become better known. Being public brings attention and trust.
Who gets the money from an IPO?
Money from newly created shares goes to the company. Money from shares sold by early owners goes to those owners. Banks keep a fee. Early owners are often blocked from selling for a few months after the IPO. This is called a lock-up period.
Is buying an IPO a good idea?
It can go either way. New companies have a short public track record, so there is less to judge them on. Some IPOs jump on day one and fall later. Others start slow and grow for years. Learn what the company sells and how it makes money before you buy.
See it in real companies
Open a company to see what it sells and how it makes money.