Facebook’s recent IPO and resulting stock price flop have been all the talk in both financial and general news media as of late. Billions have been made and lost on that single stock alone.
But what exactly is an IPO? And does it really matter to the average investor?
What is an IPO?
IPO stands for “Initial Public Offering”.
When a private company wants to sell a share of the company to the public in order to raise capital to continue expanding operations it is done through an initial public offering. It is called this because up to this point the private company hasn’t sold a share of the company publicly on the stock market.
In short, an IPO is when a privately held company owned by a few individuals or handful of investors, sells a chunk of the company on the publicly traded stock markets.