What is the purpose of an 'initial public offering' (IPO)?

The primary purpose of an initial public offering (IPO) is to raise capital by selling stock to the public for the first time. When a company decides to go public, it offers shares to investors, enabling it to generate funds that can be used for various purposes, such as expanding operations, paying off debts, and investing in new projects. This transition from a privately-held status to a publicly-traded company allows the firm to access a broader pool of investment capital and enhance its visibility in the market.

IPOs play a crucial role in the financial markets as they signify a company's growth and potential while offering investors the opportunity to participate in the company’s success through ownership of shares. By selling stock to the public, the company can leverage the capital raised to achieve its strategic goals and foster further development.