What is the purpose of an Initial Public Offering (IPO)?

The purpose of an Initial Public Offering (IPO) is to raise capital for a privately held company by offering shares to the public. When a company decides to go public, it sells a portion of its ownership in the form of shares to investors in the stock market. This process helps the company raise significant funds that can be utilized for various business needs, such as expanding operations, investing in research and development, paying off debts, or other capital expenditures.

Going public through an IPO also increases the company's visibility and can enhance its credibility with customers and potential business partners. The funds raised can provide a valuable resource for the company’s growth and development strategy, contributing to its long-term success. This is especially critical for fast-growing companies that may need substantial capital that private investments or loans cannot provide.