An initial public offering (IPO) is the process by which a privately-held company raises capital by issuing shares of stock to the public. It is the first time that a company’s shares are offered for sale to the public, and it allows the company to raise capital and create liquidity for its shareholders.
The process of an IPO begins with the company hiring an investment bank or an underwriter, which acts as an intermediary between the company and potential investors. The underwriter helps the company to determine the appropriate price for the shares, and they help to market the shares to potential investors.
After the shares are priced, they are offered for sale to the public through a process called the roadshow, during which the company’s management team meets with potential investors to explain the company’s business, financials, and future prospects.
Once the roadshow is completed, the shares are sold to the public through an auction process, and the shares are listed on a stock exchange. After the IPO, the shares are traded on the open market, and the company becomes a publicly-traded company.
It’s important to note that an IPO can be a complex and time-consuming process, and it can be risky for investors as the shares may be overvalued and the company may not perform as well as expected. Additionally, IPOs can also be costly for the company, as the fees associated with an IPO can be substantial.