An IPO, or initial public offering, is the term for the first time that a private company sells shares of its stock to the public on a stock exchange. The event means that the company has transitioned from private to public ownership, which is why an IPO is often referred to as “going public.” It’s an opportunity for a company to raise significant capital—to help it fund new growth, for example, or pay off debt. And it allows private investors, like founders, angel investors, and family members, to cash out, often realizing gains on their investment.
An IPO is a big step for a company as it provides the company with access to raising a lot of money. This gives the company a greater ability to grow and expand. The increased transparency and share listing credibility can also be a factor in helping it obtain better terms when seeking borrowed funds as well.
When a company reaches a stage in its growth process where it believes it is mature enough for the rigors of SEC regulations along with the benefits and responsibilities to public shareholders, it will begin to advertise its interest in going public.
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