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Finance Dictionary and Glossary of Investment Terms
Initial Public Offering
IPO. The first sale of stock by a company to the public.
The first stock sold by a company in going public. IPOs are a standard feature of runaway bull markets, since there is proven demand for stock and it makes sense to sell shares when they are likely to bring the highest prices. IPOs are probably the focus of more attention than they deserve, in part because the hottest IPOs can make their purchasers a quick profit by soaring soon after trading begins. In most cases, though, these early gains soon evaporate, and besides, such desirable IPOs are made available mainly to the most cherished (read: fee-generating) customers of the underwriting firms bringing out the offering. IPOs are a risky business. Caveat emptor.