What is an IPO?

IPO Definition

Initial public offering (IPO) is the act of opening the company’s capital to investors on the stock exchange, allowing its shares in the company to be traded by brokers and to have fluctuating prices according to the market.

Purpose of an IPO

Often issued by emerging companies with expansion plans, IPOs are an excellent medium for raising capital.

They also allow large, privately-owned companies to be able to receive a public negotiation.

IPO Meaning

Once a company enters such a process, it ceases to be a private company and instead turns into a publicly-traded company on the relevant stock exchange.

This means that it must make its financial statements public and share the growth and profit statements.

IPO Regulation

The IPOs are regulated by the Consolidated Finance Act (Legislative Decree 58/1998), which includes a whole series of information and transparency provisions.

Investors who are potentially interested in the Initial Public Offer (i.e., the recipients of the offer) have the right to know all the useful information to understand whether or not they should join the IPO in full awareness.

IPO Process

The process is long and complicated and involves a whole series of very different subjects.

Here are which:

  • the issuing company
  • the global coordinator
  • the sponsor
  • the specialist
  • the financial advisor
  • the law firms in charge
  • the members of the placement consortium

IPO Duration

Typically, an IPO can last from one month to six months, if you consider the whole procedure in its interest.

And this also has consequences on the possibility of trading with CFDs (the Contract for difference, contracts by which you can invest in an asset without owning it directly).

Initial Public Offerings (IPOs) FAQs

IPO stands for Initial Public Offering.
Initial public offering is the act of opening the company’s capital to investors on the stock exchange, allowing its shares in the company to be traded by brokers and to have fluctuating prices according to the market.
Often issued by emerging companies with expansion plans, IPOs are an excellent medium for raising capital.
Typically, an IPO can last from one month to six months, if you consider the whole procedure in its interest.
Once a company enters such a process, it ceases to be a private company and instead turns into a publicly-traded company on the relevant stock exchange. This means that it must make its financial statements public and share growth and profit statements.
True Tamplin, BSc, CEPF®

About the Author
True Tamplin, BSc, CEPF®

True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.

True contributes to his own finance dictionary, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.

To learn more about True, visit his personal website, view his author profile on Amazon, his interview on CBS, or check out his speaker profile on the CFA Institute website.