Definition & Meaning:

'IPO' stands for 'Initial Public Offering'. This is when shares in a company are first sold on the stock market (so that anybody (the general public) can freely buy and sell them). The company changes from being a 'private limited company' (private corporation) to a public limited company (public corporation).

The standard reason that companies give for doing an 'IPO' is to raise money to reinvest in the company to help it expand/grow further. In many cases you'll find that some of it's owners just want to sell their stake and get rich (and who can blame them).

When most companies do an 'IPO', they only sell a part of the company's total number of shares (e.g. 30%) on the stock market. The rest of the shares in the company are kept off the stock market.

If the company in the future decide to sell more of its shares on the stock market, this is called a 'secondary offering'.

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Also Called:

Flotation, Public Offering.

Related Vocabulary:

Secondary Offering, Preferred Stock, Common Stock, Dividend.

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