Stock market watchers are more than familiar with the term "IPO". It can be one of the most exciting utterances on Wall Street given the right circumstances. On the other hand, sometimes an initial public offering goes the other way and the business that become public looks foolish for having done so. What does it mean for a company to go public, and what does this mysterious term "IPO" mean? 

What Is An Initial Public Offering?

In short the term means that it is the first time a particular startup has offered shares in their business to the public. Companies are always privately held to start out, but some of them decide that a good way to raise some capital in order to expand their operations. They could seek out private investors to try to do this, but at least for some a more efficient way of doing so is to go to the public. 

When a startup become public they begin to sell off some portion of the business in the form of shares. The general public has the option to purchase those shares at whatever price the market deems fit. Once one owns the shares, they get to take part in the profits or failures of the company. The owner of the shares may sell them off at any time for whatever price the market will give. 

How To Be More Like LinkedIn

The objective of any company going public is to sell as many of their shares at as high of a price as possible on the open market. The more shares they sell at as high of a price as possible, the better the outcome for the company. After all, every company wants to raise as many funds as possible in order to generate new opportunities. 

One is going to want to hire a business lawyer to get this done properly. A business lawyer can help negotiate out the details of a deal to go public. The startup lawyer has to get in contact with players like investment banks and stock exchanges to broker a deal that brings a company to the public. 

LinkedIn used their business attorneys to get themselves listed on the NASDAQ. This is a leading stock exchange around the world, and the only way that the company got itself in such a prime spot was by listening to what their business attorney had to say. That person knew that a smooth first day of trading would be what made for a great public launch. 

Getting A Fair Price By Using A Startup Lawyer

The only way to ensure a fair price for the stock as it first goes out is to have a lawyer who knows what to do. The pricing of a new stock is critical on its first day. Priced too high and the stock may crater on the first day which is a huge PR gaffe. However, a price set too low means that many shares could be traded at below the true value. 

The ideal scenario is to have a price that is set just right to sell off some shares while at the same time watching the value of remaining shares skyrocket. Private owners of the company want the price to go up handsomely because it increases their own net worth. That is exactly what happened with LinkedIn which saw a price increase from $45 a share to $94.25 a share on the first day of trading. It was a huge boost for the company and something that gave it plenty of good PR coverage. It was the ideal scenario for an initial public offering.