IPO - Initial Public Offering IPO stands for Initial Public Offering and is the fist sale of a private company's stock to the general public. The IPO term became very popular during the tech boom in the 90s, when there were IPOs of tech companies almost daily. Most of the time small, relatively unknown private companies do IPO, but sometimes big, established private companies go public as well. The main reason small, young companies go public is to raise capital for further growth and expansion. When I company issues an IPO, company's shares are listed on a stock exchange like NYSE or TSX. The money from the shares sold during the Initial Public Offering goes directly to the company doing the IPO, thus making an IPO an excellent way to raise capital. After the IPO, the shares trade on the stock exchange they are listed between investors. When a corporation does an IPO, it essentially goes from privately held company to publicly held company. You can rarely buy shares in a private held company, while it's very easy and straightforward to buy shares of a publicly traded company. Public companies are subject of very strict rules and regulations. For example in US the regulatory body dealing with public companies is called the U.S. Securities and Exchange Commission (better known as SEC). In Canada the securities regulation is done on provincial level and only provinces with stock exchanges have such regulatory commissions – Ontario Securities Commission, British Columbia Securities Commission, Alberta Securities Commission and Quebec Securities Commission. When a company decides to issue an IPO, it has to hire an investment bank(s) to act as an underwriter of the IPO. The underwriting investment bank raises money from investors by issuing new securities, on behalf of the company doing the IPO. Buying in a brand new security issued in an IPO is risky, because there's not much data about the company available for the investors to analyze. Despite that fact, it's very hard to get on a high profile IPOs.