June 18, 2019

What's the Purpose of an IPO?

“Ride hailing is going public. According to Reuters, both Uber and Lyft are on course for an initial public offering this year. Lyft will probably debut later this month. Uber is readying the paperwork and the Wall Street roadshow that will likely end with it going public in April. Investors are all aflutter.

But what’s the point of an initial public offering in the first place? The answer to that is not as clear as you might assume.

An initial public offering (or IPO) is when a company first sells its shares for purchase on public stock exchanges. After an IPO, the company is tradable on the stock markets. Before an IPO, the only investors a company gets money from are private investors. Between Uber, Lyft, and a number of other tech companies, Wall Street observers think 2019 could be a banner year for IPOs, raising a whopping $200 billion in total.”

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