The initial public offering is the process in which a private company which wanted to raise funds will issue the company shares to the public for the first time. Public investors can subscribe to the shares and thus give capital to the company. The company after IPO is a Public company.
Issuance of shares via IPO is generally termed as Primary market transaction.
Whereas buying of shares from the stock exchanges is termed as Secondary market.
Prior to an IPO, a company is considered private. As a private company, the business has grown with a relatively small number of shareholders including early investors like the founders, family, and friends along with professional investors such as venture capitalists or angel investors.
An initial public offering (IPO) refers to the process of offering shares of a private corporation to the public in a new stock issuance.
Companies must meet requirements by exchanges and the Securities and Exchange Commission (SEC) to hold an initial public offering (IPO).
IPOs provide companies with an opportunity to obtain capital by offering shares through the primary market.
Companies hire investment banks to market, gauge demand, set the IPO price and date, and more.
An IPO can be seen as an exit strategy for the company’s founders and early investors, realizing the full profit from their private investment.