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Definition: Initial Public offering (IPO)
An initial public offering or IPO is the first instance of a private company selling their stock to the public. An IPO is generally launched by new, small companies that require capital for expansion in operations and it is also done by already public companies or large private companies that require additional capital for their expansion.
IPOs generally are high risk investments as there is no historical data present about the company and hence the performance of the stock cannot be predicted on the day of launch and it can lead to huge losses too. The companies take help of investment banking firms to appropriately value their shares before the launch of their IPO to try and minimize the risk and uncertainty involved.
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