IPO

Definition:

The initial sale of stock by a private company to the public which turns it into a public company. IPOs are typically offered by smaller, younger companies who are seeking to expand through the infusion of capital from the IPO. It can also be done by large privately owned companies looking to become publicly traded.

Most IPOs use the services of an underwriting firm, which helps it determine the type of security to issue (common or preferred). The underwriting firm also helps select the price and timing for the IPO.

More Detail IPO:

The initial day of trading as well as the near term can see huge swings in price. For small private investors, this makes IPOs tough to predict and highly risky for small investors. Most companies with an IPOs are going through a transitory growth period, which adds to the uncertainty regarding their future values.

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