An IPO (Initial Public Offering) is when a private company sells shares to the public for the first time. It is how companies "go public" — transitioning from privately held (few owners) to publicly traded (anyone can buy shares on a stock exchange).
The process: the company hires investment banks (underwriters) who value the company, set an offer price, and sell shares to institutional and retail investors. Famous IPOs: Saudi Aramco raised $25.6 billion (2019) — the world's largest. Facebook raised $16 billion (2012). In India, LIC's IPO raised Rs 21,000 crore (2022).
IPOs offer early investors and founders a chance to cash out while giving the company access to public capital for growth. However, IPO stocks are volatile — studies show that 60% of IPOs underperform the market after one year. The "IPO pop" (first-day price surge) benefits institutional investors more than retail buyers who often buy at inflated prices.