Glossary · Defined term
IPO
An IPO is the process by which a private company sells shares to the public for the first time and lists on an exchange.
Last updated Oct 2, 2026
What it means
An initial public offering is the process by which a private company sells shares to the public for the first time and lists them on a stock exchange. Investment banks underwrite the offering: they help set the price, market the shares to institutional investors, and file a prospectus (Form S-1) with the SEC detailing the business and its risks. IPOs let companies raise capital for growth and let early investors and employees sell part of their stakes. Newly public stocks are often volatile, and early investors are typically bound by lock-up periods that bar them from selling for about six months.
An example
For illustration, a private software company hires banks, files its S-1, and prices 10 million shares at $20 each, raising $200 million. On the first trading day the shares might jump to $30 or sink to $15 as the market reassesses the price. That opening volatility is a hallmark of IPOs.