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What does IPO stand for?

Companies need to raise money for their initial investment. Because they are not owned by one person who invests all his or her own money to start the company, they sell shares of stock that are traded on the stock market. The people who buy these shares, the shareholders, are the owners of the corporation. They choose a board of directors who set the company policies, hire the executive officers, and also decide on the number of shares the company will sell. The board of directors chosen by the shareholders is the governing body of the corporation, the decision makers and policy makers.

How can a corporation raise enough money to start a new enterprise? With just an idea, maybe an idea that one person came up with, and probably an idea that costs millions of dollars to get off the ground, a business needs capital. A corporation is not based on the investment of a single individual. The company must decide how many shares it wants to sell and at what price, and it sells them for the first time on the stock market, to get the ball rolling. The shares are offered to the public, and the corporation can quickly raise the amount of money it needs to get started. This is how a corporation raises investment capital. This first-time sale of stocks is called the Initial Public Offering, or IPO. A company can sell even a million shares of stock in an IPO if it is a publicly held company. Now the company has a group of investors that hope to see profits and dividends once the company uses the money they invested to get started.

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