What is an IPO? Well, an IPO stands for an initial public offering, and it's where a private company offers shares to the public. Prior to this, the private company may be made up of just founding shareholders, people who set up the company originally. Alternatively, the company may be solely owned by another company, therefore, its shares are not owned by the general public.

An IPO also allows the company to raise capital to fund company growth. Thirdly, private investors can exit and realize gains. Those founding shareholders, again, may have invested many years ago. The company's now grown, and this is their opportunity to get out and crystallize those gains they've made.

Fourthly, it allows new shareholders to invest. Maybe the company's been through its growth phase and now it wants to expand further. The company's gonna have to get hold of new funds, and going out to a wider market may be the way to do it. Now, this is potentially going to be millions of new shareholders, a fantastic wide audience to get hold of those new funds.

And lastly, investment banks aid the company in marketing, pricing, and selling the new shares.

The main reason we're going to look at for IPOs is a company looking to raise new funds. It'll then invest those funds and then hopefully expand the company further.