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IPO (Initial Public Offering)

In short

When a private company first sells shares to the public — a major corporate milestone

An IPO is when a private company sells shares to the public for the first time. It's how companies like Google, Amazon, and Apple 'went public.' IPO shares can pop on day one or drop — the first day price is notoriously unpredictable.

IPOs transition companies from private to public ownership. Underwriters (investment banks) price the offering and distribute shares. IPOs are often underpriced to generate demand — first-day pops are common. Long-term IPO performance is mixed: some become great companies, many underperform.

Related concepts

  • Venture Capital — Venture capital funds startups at early stages (Seed, Series A, B, C). Most startups fail, but one success like Google or Uber can return 1000x. VC is extremely illiquid — investments are tied up for 7-10 years.
  • Private Equity — Private equity invests in companies that aren't publicly traded. Typically 10-year investments where firms buy companies, improve them, and sell them for a profit. High potential returns but money is locked up for years.
  • Equity — Equity means ownership. When you buy a stock, you own a tiny piece of that company — including a claim on its future profits. If the company succeeds, your equity grows. If it fails, you can lose everything.
  • Market Capitalization — Market cap = share price × shares outstanding. Apple at $200/share with 15B shares = $3T market cap. Large caps (>$10B) are stable. Small caps (<$2B) are riskier but have more growth potential.