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What's an Initial Public Offering (IPO)?

An IPO is the very first sale of a stock by a company that had been privately held.  

In our earlier example, when Amanda and Jessica decided they would expand their clothing business by selling stock, their stock was offered for sale in an IPO.

An IPO is an exciting time for both the company and investors.

For the company, it means it is getting a large influx of cash  This money can be used to reward employees who were critical to a company's success, pay off loans (retire debt), invest in the company, or some combination of each.

For investors, it is a new opportunity to invest in.  There are many stories of investors who invested early with a company and made millions of dollars as a result.