What is an IPO?

//A Short Thread//

1. IPO stands for initial public offering

This is when a private company offers shares of the business to the public

By doing this a company can raise cash for business operations

This is listed as a liability on the balance sheet

2. These shares are sold to institutional and retail investors

Companies hire investment banks to gauge demand and set the IPO price etc

The IPO can be seen as an exit strategy for early investors and founders to fully realize their gains.

3. A comapnies SEC fillings also become public during this time.

The company is required to be fully transparent with business operations so investors can be informed

Warren Buffet’s guidance on investing in IPOs is: don’t.

Although the company must be transparent

There isn’t enough data immediately available for strong due diligence

He recommends waiting at least five years before investing

Anything less is a speculation.

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