If you've ever wondered about IPO stock definition, here is an explanation of the term. An initial public offering is the first sale of stock by a private company in an attempt to release the corporation to the public. While many IPOs are initiated by small businesses looking to expand capital, some larger companies will also run an IPO to have their stock publicly traded, giving the corporation access to different trading opportunities.
For example, if a small electronics store wants to open more stores, but doesn’t have the capital, it would have to borrow money from the bank. Instead, the electronics store can offer up shares to the public for purchase and use the funds to open up more locations. The profits from the new stores benefit both the shareholders and the business-owner, allowing all parties to make more money than before.
Like with any major financial decision, IPOs come with a certain amount of risk. There is a lack of historical data for the company, so it’s impossible for a business to know how it will do on the initial day of trading when the stock is offered to the public.
Have more questions? See more answers from Alot.
