How does an IPO work?

In an IPO, the company typically works with investment banks to underwrite the offering, set the initial price, and sell the shares to investors. This process can be costly and time-consuming but helps establish market demand and valuation for the company’s shares.

What makes an IPO a good investment?

One of the most important aspects of an IPO is the opening price—where the stock begins its exchange-listed life on its first day of trading. Accurately pricing an IPO is a challenge even for investment banks that have been doing this work for years. Naturally, the company holding the IPO wants a high price, while investors prefer something lower.

What is an IPO & why is it important?

Think of an IPO as the end of one stage in a company’s life-cycle and the beginning of another—many of the original investors want to sell their stakes in a new venture or a start-up. Alternatively, investors in more established private companies that are going public also may want the opportunity to sell some or all of their shares