IPO (Initial Public Offering) is a term to describe the first public offering of shares. IPO means the process of entering on a stock exchange and the initial offering of its shares to investors. The joint stock company whose shares are traded has greater responsibilities than an ordinary joint stock company whose securities are not traded on a stock exchange. On the other hand, stock trading is continuous access to a large number of potential investors who want to invest their funds. This allows the company to gain a large amount of investment funds.
Use of the IPO in practice: Companies use IPO to increase equity. Through the issue of shares and their offer in the stock market they get additional financial resources (in the form of equity). They don’t have to acquire foreign sources (e.g. a credit) The reason for the IPO may also be selling shares of the original owners, or a combination of both. IPO is associated with considerable publicity, which reflects positively on the overall awareness of the company to its reputation and credibility.