Glossary
IPO (Initial Public Offering)
The first time a private company sells shares to the public and its stock begins trading on an exchange.
Before an IPO, a company's shares are held privately by founders, employees, and investment firms, and there is no open market in them. The IPO creates one: a block of shares is sold, the company is listed, and from that day the price is set by whoever is trading.
The process is run by investment banks, which set an initial offer price and place those shares with institutional clients. Ordinary investors usually cannot buy at that offer price and are trading from the opening bell instead, which can be a materially different number.
Newly listed companies have a short public record, no history of quarterly reports to compare against, and often a large block of insider shares that becomes sellable a few months in when the lock-up period ends. None of that is a verdict on any particular listing; it is a description of what is and is not knowable about one.
Related terms
- FloatThe number of a company's shares actually available to trade, once restricted and closely held stock is excluded.
- StockA share of ownership in a company, which makes the holder a part-owner of the business rather than a lender to it.
- Market Cap (Market Capitalization)What the whole company is worth at today's share price: the price per share multiplied by the number of shares.
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