Definition

IPO (initial public offering)

In the United States, an IPO (initial public offering) is a first and one-time only sale of publicly tradable stock shares in a company that has previously been owned privately. An IPO is also sometimes known as "going public." Technically, an IPO is the offering to sell but virtually all IPOs result in all the stock offered being sold. IPOs are generally managed by companies that specialize in handling IPOs and have experience in determining what the likely IPO offering price should be. If the IPO manager determines that the stock will not sell at an offering price that is acceptable to the company, the application for an IPO is usually withdrawn until a better time. As soon as all shares of an IPO have been sold, the stock is now tradable through stock exchanges or specialists that trade in the stock and the stock price may go up or down.

The IPO procedure is specified by the U.S. Securities and Exchange Commission (SEC). The SEC maintains a publicly available, searchable database on IPO and other corporate information that is required to be filed with the SEC. The database is called EDGAR (for: Electronic Data Gathering, Analysis, and Retrieval).

This was last updated in April 2008
Posted by: Margaret Rouse

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