What is an IPO?

• A. The first sale of stock by a company to the public to raise capital.
• B. The second sale of stock after an IPO.
• C. A private placement to accredited investors.
• D. A debt offering by a corporation.

Answer: (A)

An initial public offering is the first time a company sells its stock to the public. This process is used to raise equity capital and to create a public market for the company’s shares, allowing the company to access funds for growth, repay debt, or fund acquisitions. Once the IPO is completed, the shares begin trading on a stock exchange, and pricing is determined through a process with underwriters, often involving a roadshow and regulatory filings.

The other concepts describe different things: a secondary offering is the sale of existing shares after the IPO and does not necessarily raise new capital for the company; a private placement is selling stock to accredited investors without public marketing; a debt offering is selling bonds or other debt instruments, not equity.