| Risk Level In Mutual Funds |Mutual Fund Companies |Classification Of Mutual Funds | Tax Benefit In Mutual Funds |New Fund Offer NFO | Initial Public Offer IPO |
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| Initial Public Offering, IPO | |
| Initial Public Offering,
or IPO, is the first sale of a corporation's common
shares to investors on a public stock exchange. The
main purpose of an IPO is to raise capital for the
corporation. While IPOs are effective at raising
capital, being listed on a stock exchange comes with
heavy regulatory compliance and reporting
requirements.
The term IPO only refers to the first public issuance of a company's shares. If a company later sells newly issued shares again to the market, it is called a seasoned equity offering. When a shareholder sells shares, it is called a secondary offering and the shareholder, not the company that originally issued the shares, retains the proceeds of the offering. These terms are often confused and only a company which issues shares can make a primary offering or IPO. Secondary offerings occur on the secondary market, where shareholders (not the issuing company) buy and sell shares from and to each other. The IPO process starts when the corporation files a registration statement, according to the Securities Act of 1933, with the SEC. The SEC then investigates the registration statement and approves the full disclosure. The underwriter first issues a preliminary prospectus and then an official prospectus before or along with the stock offering. After SEC approval, the price and date of the IPO are decided. Investing in an IPO is a risky and speculative investment. Only active traders, depending on their investment objectives and risk tolerance, should consider this type of investment. . |
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