In business finance, what does IPO stand for when a private company first sells shares to the public?

In business finance, IPO stands for initial public offering, the process by which a private company first sells shares to public investors.

An IPO usually changes a company from privately held to publicly traded. Before the offering, ownership is commonly concentrated among founders, employees, venture-capital funds, and other private investors. During the process, investment banks help assess the company, prepare regulatory filings, market the shares, and set an offering price.

After the shares begin trading on a stock exchange, their market price can rise or fall according to investor demand and the company’s results. An IPO can raise money for expansion, acquisitions, research, or debt repayment, while early investors may gain a way to sell their holdings.

An IPO is not the same as a stock split or a direct listing. A stock split changes the number and price of existing shares, while a direct listing allows trading without the traditional underwritten share sale. The term is also distinct from a secondary offering, which generally involves shares sold after a company is already public.