Initial public offering

“Going public” is when the stock of a closely held CORPORATION, PROPRIETORSHIP, or PARTNERSHIP is offered for sale to the public for the first time. This sale of formerly closely held shares is known as an initial public offering (IPO). IPOs are used to raise additional CAPITAL and result in publicly held corporations. In the late 1990s, initial public offerings of INTERNET companies dubbed DOT-COMS were compared to “feeding frenzies,” with investors wildly bidding up the prices of new companies that had no earnings record and untested MANAGEMENT. Early investors in dotcom IPOs often “flipped” their shares, quickly selling them for a huge PROFIT. Insiders were prevented by SECURITIES AND EXCHANGE COMMISSION (SEC) rules forcing them to hold onto their shares for a period of time, usually six months. When the dot-com bubble burst in 2000, many SHAREHOLDERS watched as the value of their paper holdings disappeared. The SEC is investigating whether executives from clients of securities firms received preferential treatment in the allocation of shares in initial public offerings.