When a corporation issues stock to the general public for the first time, it is known as a(n) initial public offering.
What is the purpose of an initial public offering (IPO)?
When shares of a private company are initially made available to the public as part of new stock issuance, it's known as an initial public offering (IPO). Through an IPO, a business can raise equity funding from the general public.
What is a disadvantage of an IPO?
An IPO has many drawbacks, one of which is that founders may lose ownership of their business. While there are ways to guarantee founders retain the lion's share of the firm's decision-making authority, once a company goes public, the leadership must satisfy the general public even though other shareholders do not have voting rights.
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