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Greetings Landon,

This is a somewhat condensed version of the answer:

An IPO is where a company sells part of itself on the public market as a way to realize money to fund operations typically. There are some exceptions like when UPS had its IPO sometimes referred to as "going public" since the stock will be on a publicly traded market as opposed to held by private investors.

Why do companies do this? Usually for one of the following 2 reasons:

1) Raise money. If you have a start up that is losing money and needs an infusion of cash this is one way to get that money without having an interest rate attached.

2) To have public stock to enable employees to be able to cash out options. If you work for a private company the rules on what you could sell the stock for and to whom are likely regulated a little more than for public companies, e.g. if someone in the Johnson family that runs Fidelity wanted to sell some stock there are rules over who could buy and how much they would pay that are different than if someone worked for Merrill Lynch which is a public company.

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