Initial Public Offering (IPO): What Does It Mean?

An Initial Public Offering (IPO) is the process by which a private company offers shares to the public for the first time, listing on a stock exchange. Companies pursue IPOs to raise capital for growth, allow early investors to cash out, or increase public visibility. The process involves working with investment banks to underwrite the offering, setting an initial share price, and conducting a 'roadshow' to attract institutional investors. IPOs can be exciting investment opportunities but historically show high volatility in the months following listing, and many IPOs underperform the market over longer time horizons.