IPO (Intial Public Offering) is the first sale of stock by a private company to the public. The most common reason for a company to initiate an IPO is in order to raise more capital. IPOs are often issued by smaller, younger companies seeking the capital to expand, but can also be done by large privately owned companies looking to become publicly traded.

IPOs can be a risky investment. For the individual investor, it is tough to predict what the stock will do on its initial day of trading and in the near future because there is often little historical data with which to analyze the company.

Also, most IPOs are of companies going through a transitory growth period, which are subject to additional uncertainty regarding their future values.

There is generally a significant amount of risk in an IPO, because the company going public is frequently small or relatively unknown, and hasn't had a chance to prove itself to the public as such, they also have the capacity for significant payoffs.