Initial public offering

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An initial public offering (IPO) is the first sale of stock by a private company to the public. IPOs are often launched by companies seeking capital to expand their business. Once an IPO occurs, a company will be listed on a stock exchange, and shares will begin to trade.

IPO costs are typically 7.5% to 8.5% of the value of the company, including underwriter's commission, legal and accounting fees, investor relations, printing, road show and an initial listing fee. For a $25 million offering, that's between $1.875 million and $2.125 million.

The number of IPOs in the U.S. has been decreasing steadily since the technology bubble in 1999-2000. They've been replaced in large part by PIPEs due to the rising costs of an IPO.

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Last modified on 24 May 2013, at 07:58