What is an IPO?

An initial public offering (IPO) or stock launch is a public offering in which shares of a company are sold to institutional investors and usually also retail (individual) investors.


An IPO allows a company to raise capital from public investors.


An IPO can be seen as an exit strategy for the company’s founders and early investors, realizing the full profit from their private investment.


IPOs tend to garner a lot of media attention, some of which is deliberately cultivated by the company going public. Generally speaking, IPOs are popular among investors because they tend to produce volatile price movements on the day of the IPO and shortly thereafter. This can occasionally produce large gains, although it can also produce large losses. Ultimately, investors should judge each IPO according to the prospectus of the company going public, as well as their financial circumstances and risk tolerance.


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