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Market Analyst
Quick AnswerThe full form of IPO is Initial Public Offering. It is the process by which a private company offers its shares to the general public for the very first time, transitioning from a privately held entity to a publicly traded company on a stock exchange.
An Initial Public Offering (IPO) is a major milestone for any company. Before an IPO, a company is considered 'private', meaning its shares are held by founders, early employees, and venture capitalists. An IPO allows the public—you—to buy a piece of the company.
Going public is expensive and brings intense regulatory scrutiny. So why do companies do it?
A company hires investment banks to underwrite the IPO. They file a Draft Red Herring Prospectus (DRHP) with the market regulator (SEBI in India, SEC in the US). Once approved, a price band is set, and retail investors can bid for shares during a 3-day window.
An IPO is the specific event where a company first sells its shares to the public. Once the IPO process is complete and the shares are listed on the exchange, they become regular stocks that anyone can buy or sell.
An IPO is the gateway for a private company's shares to enter the public stock market. It creates the initial supply of shares that will later be traded daily.
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