An initial public offering, or IPO, is the first sale of stock by a company to the
public. A company can raise money by issuing either debt or equity. If the company
has never issued equity to the public, it's known as an IPO.
An IPO is also sometimes known as "going public." Technically, an IPO is the offering
to sell but virtually all IPOs result in all the stock offered being sold. IPOs
are generally managed by companies that specialize in handling IPOs and have experience
in determining what the likely IPO offering price should be. If the IPO manager
determines that the stock will not sell at an offering price that is acceptable
to the company, the application for an IPO is usually withdrawn until a better time.
As soon as all shares of an IPO have been sold, the stock is now tradable through
stock exchanges or specialists that trade in the stock and the stock price may go
up or down.
Basis of Allotment or Basis of Allocation is a document publishes by registrar of
an IPO to stock exchanges and IPO investors. This document provides information
about final price fixed for an IPO, issue subscription (bidding) information or
demand of an IPO and share allocation ratio.