An initial public offering (IPO) is the mechanism by which a company offers its shares for public sale for the first time.
Typically this is done either because the existing directors want to cash in and/or the firm in question wants to raise new finance for expansion. IPO shares are often sold directly to institutions but may be offered to the public too. Demand for these new shares can be hard to predict so the selling firm will usually call on the services of an investment bank. These banks advise on the timing of any sale, the price of the shares being sold and help with regulatory issues. They may also act as underwriters, buying up any shares that are not wanted on the IPO date.