Initial public offering

Initial public offering or stock exchange launch may be a sort of public offering during which shares of a corporation are sold to institutional investors[1] and typically also retail (individual) investors. An IPO is underwritten by one or more investment banks, who also arrange for the shares to be listed on one or more stock exchanges. Through this process, colloquially referred to as floating, or going public, a privately held company is transformed into a public company. Initial public offerings are often wont to raise new equity capital for companies, to monetize the investments of personal shareholders like company founders or private equity investors, and to enable easy trading of existing holdings or future capital raising by becoming publicly traded.

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 After the ipo, shares are traded freely within the open market at what's referred to as the free float. Stock exchanges stipulate a minimum free float both in absolute terms (the total value as determined by the share price multiplied by the amount of shares sold to the public) and as a proportion of the entire share capital (i.e., the amount of shares sold to the general public divided by the entire shares outstanding). Although ipo offers many benefits, there also are significant costs involved, chiefly those related to the method like banking and legal fees, and therefore the ongoing requirement to disclose important and sometimes sensitive information.

details of the proposed offering are disclosed to potential purchasers within the sort of a lengthy document referred to as a prospectus. Most companies undertake an ipo with the help of an investment banking firm acting within the capacity of an underwriter. Underwriters provide several services, including help with correctly assessing the worth of shares (share price) and establishing a public marketplace for shares (initial sale). Alternative methods like the selling have also been explored and applied for several ipo's.