An initial public offering (IPO) is when a company sells shares to the public for the first time. Before an IPO, companies are private, meaning only certain people can buy and sell the shares. Once a company goes public, anyone can buy and sell shares on the stock exchanges like NASDAQ.
Businesses often go public to raise money for expansions. IPOs can also be an excellent way for early investors to cash out.
When companies go public, they must disclose their financial information. This information forms the basis for the IPO price – the price of the shares. After the IPO, supply and demand determine the stock price.
IPOs can be risky since there is no guarantee that the share price will go up. But they can also offer significant rewards if the company is successful.