IPO

An IPO is the first time a company sells shares to the public and becomes listed on a stock exchange. Before an IPO, a company is privately owned, typically by its founders, employees, and early investors. After an IPO, anyone can buy and sell its shares on the open market.

Companies go public to raise capital for growth, to give early investors and employees a way to sell their shares, and to gain the visibility and credibility that comes with being a publicly traded company. In exchange, the company takes on new obligations, including regular public financial reporting and accountability to public shareholders.

The first price at which shares trade after an IPO is often volatile, since the market is still working out what the company is actually worth without years of public trading history to rely on.