In finance, what do the initials 'IPO' stand for?

In finance, IPO stands for Initial Public Offering. It is the process through which a privately held company offers shares to the public for the first time, usually with the help of investment banks acting as underwriters.

An IPO can raise new equity capital for the company, allow early investors or founders to sell some of their holdings, and create a market in which the shares can be traded. Before the offering, the company typically prepares a prospectus describing its business, finances, risks and proposed share sale. The shares are then priced and allocated before trading begins on a stock exchange.

IPO does not mean “Initial Private Offering”: the defining feature is that shares are offered publicly. A company may also go public through alternatives such as a direct public offering or a reverse takeover. After an IPO, the stock’s freely tradable portion is called the free float. IPOs can provide funding and visibility, but they also bring underwriting costs, regulatory obligations and continuing disclosure requirements.