IPO.
In plain English
An initial public offering, or IPO, is the event where a privately held company lists on a stock exchange and sells shares to the public for the first time. Before an IPO, a company is owned by its founders, its employees, and a small group of private investors, and the general public cannot buy in. The IPO raises money for the company and lets some early owners cash out part of their stake.
01Why it matters
Most people can only buy a company's stock after it has gone public. The IPO is the dividing line between a company the public can own and one it cannot. It is also the moment a company's finances become public, because the law requires it to file detailed disclosures with regulators.
02The math, step by step
When Facebook went public in 2012, it priced its shares at $38 each and raised about $16 billion. Anyone with a brokerage account could buy the stock the day it listed. The day before, they could not.
03What this is NOT
An IPO is not a promise that the stock will rise. The offering price is set before the public ever trades the shares, and the first trading days can move sharply in either direction.