IPO

IPO refers to a private company selling stock to the public for the first time. Upon successful completion of an IPO, the company becomes public. Therefore, IPO turns a private company into a public company and is sometimes called going public.

There are many differences between a private company and a public company. For example, a private company has a limited number of shareholders who can be the founders, key employees, or private investors. Shares of a private company cannot be traded at a stock exchange. On the other hand, ownership of a public company is widely held by public investors, and shares can be traded at stock exchanges. To keep shareholders informed, a public company is required by SEC to publish financial statements regularly. In summary, a private company is not open to public investments while a public company is open to the market.

IPO offers a way for private shareholders to cash in their early investments. An IPO has many advantages, as well as disadvantages. They are summarized as follows.