What is an IPO? (Initial Public Offering)
What is an IPO? (Initial Public Offering)
An IPO,
or Initial Public Offering, is the
process through which a private company becomes a public company by offering its shares to the general
public for the first time. Until the IPO, the company is privately owned –
usually by its founders, early investors, and a few private stakeholders. But
once the company decides to grow and raise more money, it lists itself on a
stock exchange like NSE or BSE and allows the public to buy shares.
For example,
imagine a bakery that started small, grew well, and now wants to open 100 more
branches across India. To raise the required funds, the owner decides to sell
part of the company’s ownership to the public. So, they launch an IPO. When the
public buys these shares during the IPO, they become part-owners of the
company. The company, in return, receives the money it needs to expand.
After the IPO,
the shares are listed and can be bought or sold in the stock market. IPOs are
often exciting for investors because they get a chance to invest in a company
from the beginning of its public journey. However, investing in IPOs should be
done carefully by researching the company’s background, financials, and future
plans.
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