what is the purpose of an initial public offering 
an ipo is essentially a fundraising method used by large companies in which the company sells its shares to the public for the first time following an ipo the company s shares are traded on a stock exchange some of the main motivations for undertaking an ipo include raising capital from the sale of the shares providing liquidity to company founders and early investors and taking advantage of a higher valuation can anybody invest in an ipo oftentimes there will be more demand than supply for a new ipo for this reason there is no guarantee that all investors interested in an ipo will be able to purchase shares those interested in participating in an ipo may be able to do so through their brokerage firm although access to an ipo can sometimes be limited to a firm s larger clients another option is to invest through a mutual fund or another investment vehicle that focuses on ipos 