What is an Initial Public Offering (IPO)?

An IPO is the process where a private company first offers its shares for sale to the general public, transitioning from private to public ownership and listing on a stock exchange.

Why do companies choose to go public through an IPO?

Companies go public primarily to raise substantial capital for growth, expansion, or debt repayment. It also increases their visibility, enhances their valuation, and provides liquidity for early investors and employees.

What are the potential risks for investors participating in an IPO?

Risks include high stock price volatility shortly after listing, the potential for the price to fall below the offering price, and limited historical public trading data to assess the company's performance.

How do individual investors typically participate in an IPO?

Individual investors usually participate by purchasing shares once they begin trading on the secondary market. Direct access to the primary offering is often limited to institutional investors or preferred clients of underwriting banks.

What is the role of an underwriter in an IPO?

Underwriters, typically investment banks, manage the IPO process. They value the company, prepare regulatory filings, market the offering to potential investors, and facilitate the initial sale of shares.