What is an IPO (initial public offering)?

An initial public offering, or IPO, refers to the first time a company offers its shares to the public market. This process allows the company to raise capital by selling ownership stakes to investors. The significance of an IPO lies in its role in transitioning a company from private ownership to public ownership, thereby enabling the company to access a wider range of funding sources. Once publicly traded, the company's shares become available on stock exchanges, allowing for further trading among the public.

In an IPO, the company typically works with underwriters to determine the pricing, amount of shares to be issued, and manage the overall offering process. This critical event can represent a major step in a company's growth trajectory, providing the necessary funding for expansion, paying debts, or other corporate needs.