What is an IPO?

An IPO, or Initial Public Offering, refers to a corporation's first sale of stock to public investors. This process allows a private company to raise capital by offering its shares to the general public for the first time. Through an IPO, the company transitions from being privately held to publicly traded, which can significantly enhance its visibility, credibility, and financial resources.

When a company decides to go public, it typically works with investment banks to determine the offering price, navigate regulatory requirements, and market the shares to potential investors. This capital raised can be used for various purposes, including funding expansion, paying off debt, or enhancing research and development efforts.

Understanding this definition reinforces the concept of how companies can leverage public financing to support sustainable growth and development. The other options, while related to stock and securities, do not accurately capture the essence of an IPO as they refer to different concepts entirely, such as private sales or established trading activities in the secondary market.