What is IPO?
Initial Public Offering (IPO) is the stock of a private company is offered to the general public and IPOs are often issued by younger, small companies seeking capital to expand, but they can be also be done by large privately owned companies looking to become public traded.
How a company offer IPO?
Company before it becomes public hires an investment bank to handle the IPO. Later, along with the underwriting agreement they use, they file the registration statement with SEC. SEC scrutinizes the disclosed information and if found right, it allots a date to be announce the IPO.
Why a company offer an IPO?
Offering an IPO is a money-making exercise. Every company needs money to invest there business, it maybe to expand, to improve their business goal, to better the infrastructure, to repay loans, etc.
Company going public means that can be brand has gained through success to get the name flashed in the stock exchange. It is a matter of credibility of a company.
Should you invest in IPO?
We are deciding whether to put your money into an IPO of a relatively Start-up company is indeed a investment to grow their business. Being a sceptic is a positive attitude to have in the stock market.
The Background checks
Obviously, company does not have an enough data to back your decision, because it is just going public now. you need to scrutinize it. fund management team and their plans of IPO generated fund utilization.
Who is underwriting
The process of underwriting is raising investments by issuing new securities. Be cagey of the underwriting of small investment banks Usually, an IPO with a success potential is backed by big brokerages that can endorse a new issue well.
Lockup periods
Often IPO takes a deep downtrend after the IPO goes public. The reason behind this fall of the share price is the lockup period. After the lock-up period ends, the share price experiences a drop in its price.
Flipping is reselling a hot IPO stock in the first few days to earn quick profit. The reason behind this is that companies want long-term investors who hold their stock, not traders.

Author's Bio: 

An IPO (initial public offering) is referred to a flotation, which an issuer or a company proposes to the public in the form of ordinary stock or shares. It is defined as the first sale of stock by a private company to the public. They are generally offered by new and medium-sized firms that are looking for funds to grow and expand their business.