What is an IPO?

What is an IPO?

An Initial Public Offering, or IPO, is the first time a private company sells its shares to the piblic and lists on the stock exchange. Companies often launch IPOs to raise money to expand, pay off debt, or allow early investors to cash out some of their holdings. After the IPO, the company’s shares can be bought and sold on the ASX like any other stock.

For investors, IPOs can be exciting because they offer a chance to get in early. Some IPOs have become very successful, with shares rising strongly after listing. Others, however, have disappointed when the company failed to meet expectations.

The risk with IPOs is that there isn’t much trading history to judge the company by. You’re buying based on the information in the prospectus and market sentiment at the time. Beginners should approach IPOs with great care. They can be opportunities, but they are also unpredictable, and it’s wise not to invest more than you can afford to lose.