Initial Public Offering (IPO)

An initial public offering (IPO) is the first offering of a firms' stock (shares) on the stock market, at the time it 'goes public.’ Because a stock market usually values the stock on the expectations of the firm's future growth and income, IPO's are typically an opportunity for the founders and other early investors to make high profits by cashing their stockholdings. With an IPO, the company can change control of the company from the private owners’, founders’, or controlling family’s hands to partially (even a majority) public investors. An IPO often has the added benefit of providing both expansion capital as well as liquidity for the company.