Initial Public Offering (IPO), also referred to simply as a "public offering", is when a company issues common stock or shares to the public for the first time. They are
often issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
In an IPO, the issuer may obtain the assistance of an underwriting firm, which helps
it determine what type of security to issue (common or preferred), best offering price and time to bring it to market.
IPOs can be a risky investment. For the individual investor, it is tough to predict
what the stock or shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company.
Also,
most IPOs are of companies going through a transitory growth period, and they are therefore subject to additional uncertainty regarding their future value.
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