What is an IPO? Definition of Initial Public Offering

IPO

Almost every company has some long-term objectives. And of course, growth of the company revenue is among these targets. However, at some point, the company’s money supply could become insufficient to maintain an accelerating growth rate. One of the possible scenarios is to increase the debt of the company. But the companies have a greater opportunity, an Initial Public Offering, or an IPO.

What is an IPO?

Initial public offering is the process by which a private company can go public by sale of its stocks to investors. It could be a new, young company or an old company that decides to be listed on an exchange and hence goes public.

IPOs occur regularly, the latest examples of such are Coinbase or Robinhood. By the way, both of them are available for trading with FBS.

Meaning of IPO

Think of an IPO as the end of one stage in a company’s life cycle and the beginning of another—many of the original investors want to sell their stakes in a new venture or a start-up. Alternatively, investors in more established private companies that are going public also may want the opportunity to sell some or all of their shares.

From the retail investors’ perspective, the IPO can be an opportunity to invest in a promising company that might multiply its price. For example, Amazon has gained more than 120 000% growth since its IPO in 1997.

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2022-04-05 • Updated

Frequently asked questions

How to start trading?

If you are 18+ years old, you can join FBS and begin your FX journey. To trade, you need a brokerage account and sufficient knowledge on how assets behave in the financial markets. Start with studying the basics with our free educational materials and creating an FBS account. You may want to test the environment with virtual money with a Demo account. Once you are ready, enter the real market and trade to succeed.
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