What does IPO stand for in investing?

IPO stands for initial public offering, the process by which a private company first offers shares to the public on a stock exchange.

Before an IPO, a company’s shares are usually held by founders, employees, private investors, or venture-capital firms. During the offering, the company and its advisers determine an offering structure and price range, prepare regulatory filings, and market the shares to potential investors. After pricing, the shares begin trading in the public market, where their price can move according to supply and demand.

An IPO is different from a secondary-market trade. In an IPO, the company may receive proceeds from newly issued shares. When investors later buy and sell those shares on an exchange, the money generally changes hands between investors rather than going directly to the company.

The offering price is not a guarantee of future performance. A stock can rise, fall, or remain volatile after listing. Companies may also use direct listings or special-purpose acquisition combinations as alternatives to a traditional IPO.