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

The Initial Public Offering (IPO) refers to the first time a private company sells its shares to the public, allowing it to raise capital by offering ownership stakes to investors. This process transforms a private company into a publicly traded entity, which can enhance its visibility, credibility, and ability to grow through access to broader financial markets.

This definition aligns precisely with the meaning of an IPO, as it signifies the moment when the company offers its stock for the first time on a public exchange. This significant step not only provides the company with capital but also subjects it to regulatory requirements and scrutiny, thus increasing its visibility in the marketplace.

The other options do not accurately describe an IPO: a secondary sale refers to the trading of shares that have already been issued; a merger involves combining two companies, typically where one acquires the other rather than issuing new shares; and offering bonds pertains to debt financing, which is distinctly different from equity financing involved in an IPO.