What does the acronym IPO stand for?

IPO stands for “initial public offering,” the first public sale of a company’s shares.

An IPO is the process by which a privately held company offers stock to public investors and becomes publicly traded. Investment banks commonly help the company prepare disclosures, estimate demand, set the offering price, and distribute the shares. Afterward, investors can trade the stock on an exchange.

An IPO may raise new capital for the company, allow early investors or founders to sell part of their holdings, or accomplish both. The offering is normally described in a prospectus, which explains the business, finances, risks, and terms of the sale.

“Initial” is the key word and the most common point of confusion. A later sale of shares by an already-public company is generally a seasoned or follow-on offering, not an IPO. Google’s 2004 IPO is also notable because it used a Dutch auction rather than relying entirely on a conventional book-building process.