What is the definition of Initial Public Offering IPO?

An Initial Public Offering or IPO is the very first sale of stock to the public by a private company. This is also known as 'going public'. There are two kinds of companies who will undertake an IPO:

• Startup companies looking to raise capital and investors
• Large private companies looking to become publicly traded

A company looking to conduct an IPO will usually employ an investment bank to help with the IPO, with the advisory service provided including valuation and timing.

Investing in IPO companies is usually risky as there is no historical data on the performance of the stock and the stock of newly public companies typically tends to fluctuate wildly after and on the IPO date.