What is an IPO?
When a company embarks on an IPO (which stands for initial public offering) it goes public on a stock exchange. This can also be known as floating, flotation, or just ‘going public’.
IPOs are one of many ways in which companies can seek to raise capital, with other popular options including finding major investors, crowdfunding or using retained earnings.
A successful IPO can raise huge amounts of capital: as Alibaba did in 2014 when it floated on the New York Stock Exchange and raised over $20 billion. However, IPOs also incur considerable costs and require the company involved to make itself fit for the public eye and its exchange’s compliance rules.
This all makes any float a costly consideration for a business. For traders, though, a float can be a great way of getting a share of a company the moment it hits the stock market.