Asked by AreebEconomics 📈

What is an IPO and why is it a big deal when a company goes public?

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Ismail Jeilani

BSc Political Economy | Ex-Google | 7 years Teaching Experience

An IPO stands for "Initial Public Offering". When a company IPO's, you (and most other people) can buy and sell small pieces of it (called shares). Owning shares of a company means that they will actually share their profit with you. Target, Walmart, and Google are example companies (there are thousands). If you have one $700 share in Google, you will be entitled to a pro-rata share in their profits (about $22 per year). Companies sell these shares to raise money for projects, to make it easier to pay employees, and for other reasons. We call such companies “public companies”, and members of the public can buy or sell them.

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