IPOs 101

01:18 Mins Read

When companies decide to sell their shares to the public, it’s popularly known as an IPO. Learn more about IPOs in this video.

Transcript

IPOs 101 What is an IPO? Short for Initial Public Offering, an IPO is the initial sale of a company’s shares to the public. Before an IPO, a company’s shares are said to be privately held. After an IPO, the shares of the company become publicly held. IPOs help companies raise capital for their business without increasing their debt. Young companies may go public to raise more capital for growth. Established companies may issue IPOs to expand their business. Some companies may even launch IPOs to pay their bills. Generally, a major portion of the shares issued through an IPO are purchased by institutional investors. Only a small portion of the IPO issues is held by individual investors. So, individual investors tend to generally purchase their shares from the secondary market, Where shares are traded through stock exchanges. Want to know more about the types of shares available to individual investors? Find out more in the next chapter of Smart Money.