In the United States of America an initial public offering or IPO is the initial sale of the common shares of a corporation to the public. It represents a primary market.
The sale of stock is regulated by authorities of financial supervision and where relevant by a stock exchange. It is usually a requirement that disclosure be made of the financial situation and prospects of a company be made to prospective investors.
In the United States, during the dot-com bubble of the late 1990s, many venture capital driven companies were started, and seeking to cash in on the bull market, quickly offered IPOs. Usually, the stock price spiraled upwards as soon as a company went public, as investors sought to get in at the ground-level of the next potential Microsoft.
Initial founders could often become overnight millionaires, and due to generous to stock options, employees could make a great deal of money as well. The majority of IPOs could be found on the Nasdaq stock exchange, which is laden with companies related to computer and information technology.
This phenomenon was not limited to U.S. In Japan, for example, a similar situation occurred. Some companies were operated in a similar way in that their only goal was to have an IPO. Some stock markets were born for those companies, such as Nasdaq Japan.
See also: financial market, aftermarket, dot-com, reverse merger