What is Initial Public Offering (IPO)?

An Initial Public Offering (IPO) is a sale of shares of a private company to the public — particularly institutional and retail investors. This process, which takes place on a stock exchange, transforms the private company into a publicly traded company by selling securities that represent a fraction of ownership. Companies that intend to conduct an IPO must adhere to rules and regulations as set out by the U.S. Securities and Exchange Commission (SEC).