Initial Public Offering (IPO) Definition

Learn the definition of initial public offering (IPO) and other ETF terminology from the etf.com glossary.

Learn more about Initial Public Offering (IPO)

An initial public offering (IPO) is the process by which a private company offers shares of its stock to the public for the first time. This process involves various steps, including filing a prospectus with the Securities and Exchange Commission (SEC), setting an IPO price, and marketing the shares to potential investors. ETFs can invest in IPOs in a few different ways. One way is to purchase shares of the IPO directly through a brokerage firm. Another way is to invest in an ETF that tracks IPOs. These ETFs typically invest in a basket of newly public companies, offering investors a diversified exposure to this asset class. ETFs do not have IPOs in the same way that individual stocks do. ETFs are created through a process known as the creation and redemption mechanism, and they are not issued in an initial public offering like traditional stocks.

Related Terms

Index Provider, Creation and Redemption Mechanism