Initial public offering or stock market launch is a type of public offering in which shares of a company are sold to institutional investors and usually also retail investors; an. Through this process, colloquially known as floating, or going public, a privately held company is transformed into a public company.Initial public offerings can be used to raise new equity capital for companies, to monetize the investments of private shareholders such as company founders or private equity investors, and to enable easy trading of existing holdings or future capital raising by becoming publicly traded.
Although IPO offers many benefits, there are also significant costs involved, chiefly those associated with the process such as banking and legal fees, and the ongoing requirement to disclose important and sometimes sensitive information.
Details of the proposed offering are disclosed to potential purchasers in the form of a lengthy document known as a prospectus.
Underwriters provide several services, including help with correctly assessing the value of shares and establishing a public market for shares .
