Encyclopedia of Investment Terminology

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Initial public offering [IPO]

An Initial Public offering, also known as going public describes the action of issuing shares of stock to the public for the first time. Companies may wish to go public for several reasons, mainly because they seek to raise capital.

Investors who acquire shares of a company become shareholders and have the right to future profits and the right to capital distributions in case of bankruptcy and dissolution.

The company issuing stock for the first time employs an underwriter (an investment bank) who will sell its shares to investors.

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