What is the primary purpose of an IPO?

The primary purpose of an Initial Public Offering (IPO) is to allow a company to raise capital by selling shares to the public. This process involves a private company transitioning to a publicly traded entity, providing it with significant financial resources that can be used for various strategic purposes, such as funding expansion, investing in new projects, increasing market presence, or strengthening the company's balance sheet.

When a company goes public through an IPO, it issues new shares that investors can buy, which subsequently increases the company’s capital base. This influx of funds is crucial for many companies looking to grow and can be a transformative step in their development. The capital raised is not merely for operational needs but can also support long-term goals, including research and development, marketing initiatives, or acquisitions.

In contrast, allowing shareholders to sell their existing shares is typically a function of secondary markets, rather than the primary goal of the IPO itself. Paying off existing debts or acquiring other companies might be part of the company’s use of the raised capital after the IPO, but they do not define the fundamental purpose of going public.