What is an ‘initial public offering’ (IPO)?

An initial public offering (IPO) refers to the first time a company offers its shares to the public for sale. This process allows a private company to transition into a publicly traded company, raising capital from public investors in exchange for equity ownership. The funds generated from an IPO can be used for various purposes, such as expanding the business, paying off debt, or investing in research and development.

This specific action is pivotal as it marks a significant milestone in a company's growth, providing it with access to a broader pool of capital. An IPO also subjects the company to regulatory requirements, including full disclosure and adherence to guidelines set forth by governing bodies like the Securities and Exchange Commission (SEC).

In contrast, the other options describe scenarios that do not align with the definition of an IPO. The last sale of stock before a merger is not public investment, a secondary offering involves shares that have already been issued, and private equity funding refers to investments made in private companies, which does not involve the public trading of shares.