IPO / Going Public (Initial Public Offering)

Putting a company's stock — until then held only by founders and early investors — on the market so the general public can buy it for the first time is an IPO (initial public offering). Think of it as "the day the company debuts on the market."

The company raises large funds by selling stock then, and early investors gain a way to cash out their stakes. The general public can finally buy the stock.

It means the company is raising large funds from the market for things like business expansion or debt repayment. From day one of listing the market prices the company daily, and unlike when private, a stock price and disclosure obligations attach.

One thing to remember: an IPO is a trade where the sellers (founders and early investors) choose the timing and price. They list when they judge they can sell their stake dearest. Since those who know the company best see "now is good to sell," the buyer starts at an information disadvantage.

A much-anticipated IPO can jump a lot on day one versus the offering price, but it also often starts weakly below the offering price.

A day-one price jumping far above the offering price is not purely a good thing. It also means the offering was priced low, so the company received less money than it could have. That gap mostly goes to institutions pre-allotted the offering, while the general public buying in the market after listing buys at an already-risen price.