Initial Public Offering (IPO)

Companies go public through an IPO to raise money for growth, to give early investors and founders a way to sell some of their holdings and to raise their profile. Once listed, the company can more easily raise further money in the future.

The process usually involves investment banks, which help prepare detailed documents describing the business, its finances and its risks, advise on the share price and find investors. The company must meet the exchange's listing requirements and the rules of securities regulators.

For example, a company might sell 20 million shares at 25 each in its IPO, raising 500 million. On its first day of trading, the share price may rise above or fall below the IPO price, depending on demand.

Going public brings obligations. Listed companies must publish regular financial reports, follow governance rules and face scrutiny from investors and the media. Some companies choose to stay private to avoid these demands. IPO investments can be volatile, and newly listed shares do not always perform well in the long run.