Skip to main content
Message Font: Serif | Sans-Serif
 
No. of Recommendations: 0
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.

Regards,
JB
Print the post  

Announcements

What was Your Dumbest Investment?
Share it with us -- and learn from others' stories of flubs.
When Life Gives You Lemons
We all have had hardships and made poor decisions. The important thing is how we respond and grow. Read the story of a Fool who started from nothing, and looks to gain everything.
Contact Us
Contact Customer Service and other Fool departments here.
Work for Fools?
Winner of the Washingtonian great places to work, and Glassdoor #1 Company to Work For 2015! Have access to all of TMF's online and email products for FREE, and be paid for your contributions to TMF! Click the link and start your Fool career.