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Crypto Terms:  Letter I
Jul 07, 2023 |
updated: Apr 02, 2024

What is Initial Public Offering (IPO)?

Initial Public Offering (IPO) Meaning:
Initial Public Offering (IPO) - happens when a company starts selling shares on the stock market for the first time.
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Let's find out Initial Public Offering (IPO) meaning, definition in crypto, what is Initial Public Offering (IPO), and all other detailed facts.

An initial public offering (IPO), also referred to as an initial purchase offering, defines an event when a company starts selling shares on the stock market for the first time ever. It’s considered to be a noteworthy milestone since the company has successfully reached a point where they’re able to offer stocks and reach serious investors. Usually, startups and relatively new companies look for opportunities to introduce an initial public offering.

If a company hasn’t announced an IPO, then it is considered private. While there are benefits for a company to stay private such as reduced risks, there are also downsides like the fact that private companies can attract only a limited number of investors. By announcing an IPO, the company becomes visible on the stock market for the first time. Then it’s able to take advantage of its new position in the market by getting more investments and improving the company’s overall performance.

An initial public offering provides startups and new companies that are expecting growth with a huge opportunity to finally go public and attract more investors.

In order to be eligible for announcing an IPO, a company has to reach a private valuation of 1 billion US dollars and go through a strict checking procedure done by the Securities and Exchange Commission (SEC). Additionally, the company must carry out a thorough potential share price evaluation. During this process, their private shares are turned into public shares.

After establishing that the company is able to announce an IPO, a certain amount of time is taken to introduce and popularize it in order to prove that this is the prospective company you want to invest in.

How often an IPO is announced depends on the economic situation. For example, barely any companies announced their IPOs during the 2008 economic crisis. 

In the current market, as the global economy recovers, more and more companies are considering moving from private to public. 

The initial coin offering (ICO) was based on the design of an IPO. Thus it often encounters the same difficulties as IPOs. Instead of offering shares, ICO offers cryptocurrencies.