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The process by which a private company offers shares to the public for the first time on a stock exchange.
An IPO transforms a private company into a publicly traded one, raising capital and providing liquidity for early investors and employees. Investment banks underwrite the offering, setting an initial price based on company valuation and investor demand. Historically, IPO stocks have shown first-day price "pops" averaging 10-15% but tend to underperform the broader market over the following 3-5 years. Individual investors often cannot access IPO shares at the offering price and must buy on the open market after trading begins. Due diligence is critical because IPO companies have limited public track records.