Initial public offering

A company's first sale of shares to the public, usually through underwriters who gauge demand and set the price. It creates the listing on which later secondary trading depends.

Where you will meet it

Initial public offering appears in 4 learning outcomes on the CFA syllabus. A few of them:

• Put the Priority of Transactions standard, VI(B), into practice
  CFA Level I · Ethical and Professional Standards

  “Participation in an oversubscribed initial public offering by a member is the recurring problem, since any allocation to the member is an allocation denied to a client.”

• Explain the secondary and primary markets for equity and the role each plays
  CFA Level I · Equity Investments

  “The primary market is where a company sells new shares and receives the money: an initial public offering the first time, a seasoned or follow-on offering afterwards, usually through underwriters who gauge demand and set the price.”

• Contrast corporate issuers that are publicly owned with those held privately
  CFA Level I · Corporate Issuers

  “A private company can go public through an initial public offering, a direct listing or a merger with a special purpose acquisition company.”

• Set out why private businesses are valued and what financial analysts should concentrate on
  CFA Level II · Equities

  “Transaction-related valuations support venture capital financing, initial public offerings, acquisitions and reorganisations in bankruptcy.”

See also

Underwriter

Practise it

• Today's practice question One question, with every wrong option explained.
• Free Level I diagnostic test Twelve questions that show which topics to start with.
• Free finance calculators Check your arithmetic on the exam's core formulas.

All terms beginning with I · Glossary