initial public offering (IPO)
The process of selling stock in a corporation for the first time to the general
public. IPOs are handled by investment banking firms, which study the corporation's
financial situation and then decide how many shares of stock should be sold
and at what price. Individual investors are sometimes shut out of IPOs because
investment bankers typically dole out IPO shares to institutional customers,
such as mutual funds, pension funds, banks, and insurance companies. Accordingly,
IPOs have received particular attention in recent years because class action
lawsuits against corporate directors and officers have arisen in conjunction
with the way in which the IPOs were allocated among various parties. Such claims
are known as IPO laddering claims. See also
Initial public offering laddering claims;
Class action.
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