What is the term for a company's first sale of stock to the public?

A company’s first sale of stock to the public is called an Initial Public Offering, or IPO. It is the transaction through which a privately held company offers shares to public investors and usually begins trading on a stock exchange.

An IPO commonly involves investment banks, known as underwriters, which help value the company, structure the offering and set the initial share price. The company prepares a prospectus describing its business, finances, risks and planned use of the proceeds. Investors then buy shares at the offering price, after which trading can begin in the open market.

The offering can raise new capital for expansion, research, hiring or debt reduction. It can also allow founders, employees or early investors to sell some existing shares. Those purposes are distinct, but both can occur in the same IPO.

A frequent confusion is between an IPO and a secondary offering. An IPO is the company’s first public sale of shares; a secondary offering occurs after the company is already publicly traded. A private placement sells securities to a limited group without a broad public offering, while a stock split changes the number and price of existing shares without itself raising capital.