IPO

An IPO (initial public offering) is the process by which a private company becomes public. The company makes the first sale of its shares onto the primary market through the help of an investment bank which serves as its agent in issuing the stock, advising on the best offering price and time to bring the shares to the market. IPOs can be issued by younger companies in a transitory period, seeking the capital to expand, but can also be done by large privately owned companies that decide to become publically traded.

Investors may participate in an IPO by subscribing to a certain number of shares. However IPOs can be a risky investment as it is difficult to predict what the stock will do in its first day of trading and in the near future. If the stock is overpriced, it is likely to fall as it begins trading, and if it is underpriced, it is likely to rise as it begins trading.