What does IPO stand for?

IPO stands for “Initial Public Offering,” the first public sale of a company's shares.

In a typical IPO, a privately held company works with investment banks to prepare a prospectus, set an offering range and sell shares to investors. Once the shares begin trading on a stock exchange, the company becomes publicly traded and investors can buy or sell its stock in the open market.

An IPO can raise new capital for business expansion, while also allowing founders, employees or early investors to sell some holdings. It is not the same as an “initial private offering”: the defining feature is that the shares are offered to the public. “Interim Public Offering” and “International Public Offering” are not the standard expansion of the acronym.

Companies may choose alternatives such as a direct listing, in which existing shares begin trading without a traditional underwritten offering, or a SPAC merger. Those routes can take a company public, but they are not conventionally called IPOs.