Initial Public Offering (IPO)
The first sale of a company's shares to the public on a stock exchange.
An initial public offering is the process by which a private company sells shares to the public for the first time, listing on a stock exchange. IPOs generate significant market attention and can create volatility in the listed stock and the broader sector. Large IPOs from major companies can even affect currency flows if international investors buy or sell the domestic currency to participate.
How It Works
- The company hires investment banks to underwrite and price the offering
- Shares are allocated to institutional investors before trading begins
- On listing day, shares begin trading on the exchange at market-determined prices
- A lock-up period (usually 90-180 days) prevents insiders from selling immediately
Trading Tips
IPO stocks can be extremely volatile in the first days and weeks of trading
Wait for the lock-up expiry before sizing positions, as insider selling can pressure the stock
Large IPOs in a specific country can influence short-term capital flows and the domestic currency
Related Terms
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