Initial public offering

An initial public offering (IPO) is a company’s first sale of shares to public investors, typically alongside a stock-exchange listing. It can raise new capital and let existing shareholders sell shares.

Underwriting: The process by which a financial institution assesses and helps distribute securities issued by a company. Investment banks organize the offering, advise on pricing, and may buy shares for resale.
Private company: A company whose shares are not offered to the general public on a stock exchange. An IPO marks the transition from private ownership to public share trading.
Direct listing: A method of listing existing shares for public trading without a traditional underwritten share offering. It provides an alternative to the conventional IPO process, often without raising new capital.
Initial public offering underpricing: The gap when an IPO’s offer price is below its price at the close of first-day trading. A sharp first-day price rise can indicate that the issuer sold shares below their market value.
Registration statement: A formal disclosure document filed with a securities regulator before a public securities offering. It provides regulators and potential investors with required information about the company and offering.
Common stock: A class of corporate ownership that commonly carries voting rights and a claim on residual profits. An IPO often sells common shares representing ownership in the company.
Special-purpose acquisition company: A publicly traded shell company created to merge with or acquire a private operating company. A merger with a SPAC can take a private company public without a traditional IPO.
Share dilution: A reduction in existing shareholders’ ownership percentage when a company issues additional shares. New shares sold in an IPO can dilute the ownership stakes of existing shareholders.
Roadshow (finance): A series of presentations in which a company’s executives and underwriters introduce a securities offering to potential investors. The presentations help gauge investor demand before the offering price is set.
Primary market: The market in which issuers sell newly created securities to investors. Shares sold by the company in an IPO enter the primary market.

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