What is an IPO, Anyway?

Facebook goes on sale today! But what does that mean? What is an IPO exactly? Tech Talker explains

Eric Escobar,
May 18, 2012

What is an IPO, Anyway?

Unless you've been living under a rock, you've probably hear that today is Facebook's initial public offering!

But what does that mean exactly? What is this initial public offering or "IPO"?

Basically, up until now, Facebook was a private company in which the owners (aka, Mark Zuckerberg and his investors) were able to do whatever they wanted without asking anyone's permission or caring about the consequences. For a perfect example, just check out Facebook's recent purchase of tiny photo company Instagram for a whopping $1 billion (yes, billion).

However, after this IPO, Facebook will be selling off small portions of its company to the public on order to raise more money for their coffers. Now you're probably asking yourself, "So what?" There are many technology companies in which you can buy shares, such as Google or Microsoft. Why is this IPO getting so much media attention?

Well, it all has to do with the amount of money this IPO will produce for the company. As it stands right now, Facebook's IPO will be the third largest ever -- and the largest IPO of any technology company. The largest IPO in history was Visa back in 2008 when it made $19.7 billion. The second was General Motors at $18.1 billion. Facebook's IPO will bring in around $16 billion, making this tech giant even bigger! In fact, according to Thompson Reuters, the Facebook IPO brought in more capital in one listing than all of the combined U.S. IPOs this year, which was $12.1 billion.

So what's next for Facebook? Will it live up to its huge expectations? Will it disappoint? And what does this mean for users of the social networking site? Check back on the Tech Talker page for news and updates. And of course, you can also find Tech Talker anytime on Facebook

Related: 5 Lessons for Parents About Kids on Facebook

Facebook image courtesy of Juan Camilo Bernal / Shutterstock.