Initial public offering (IPO) is an offering of stock or shares to the general public by a company which wants to raise capital for the first time. Following an IPO, the company gets listed and its shares are traded on stock exchanges.
Sometimes, the owner of a company, who holds most of the shares in a company, sells his/her holdings in the market to raise money for himself /herself through offer for sale of shares. Such offer for sale of shares is also known as IPO if this is happening for the first time and will lead to listing of the company on stock exchanges.
Many a time, the government might be offering IPOs under its disinvestment policy . In a disinvestment, government sells a part or the entire holding in a public sector company through offer for sale of shares to public.
The money paid by investors for an IPO goes directly to the company. However, in the offer for sale of shares in the course of disinvestment, the money goes to the government.
Once the permission to trade these shares are granted to shareholders, the profit or loss incurred on the transactions accrues to the shareholders. The future profits made by a company are also distributed among shareholders as dividend.
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