What is Initial Public Offering.?
Initial Public Offering, or IPO is essentially the first sale of stock by a private company to the masses. IPOs are, more often than not, offered by smaller and/or emerging companies looking for more capital to expand. However, at times, large private companies can also file an IPO in order to become publicly traded.
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In any IPO, the issuer usually gains the support of an underwriting firm that assists it evaluate which type of security to issue (preferred or common) as well as the best time and offering price for bringing it to the market.
IPOs generally tend to be a pretty risky investment not for only smaller companies, but also for bigger and more successful ones.This is so because for an individual investor, it is always tough to assess or predict the performance of company in the first day of its training. Therefore, there are a lot of apprehension and nervousness in the air.
Edited and Updated 15th February 2014