Stocks: IPOs

Initial Public Offerings, or IPOs, are a bit like a corporate version of a coming-out party. Depending on the company's prospects for growth, there may be many suitors eager to take part in the bash.

IPOs occur when a company first issues stock to the public. Back in the late 90's, the IPO market was booming as investors big and small scrambled to get a piece of the latest hot technology company that came to market. But with that exuberant buying could cause the stock price to pop on the first day of trading. But that first-day "pop" generally does not last very long so you could see the stock price retreat in the days and weeks following the IPO. So buyer beware: Fortunes can be gained and lost fairly quickly in the world of IPOs.

IPOs may come from established companies that have, for one reason or another, long been closely held by a few large investors. Goldman Sachs (GS:NYSE), which went public in the spring of 1999, is such an example. Initial offerings may also come from an operation within a larger company, with the parent company eager to open the division to the markets and unlock its shareholder value. An example of this is when Freescale Semiconductor (FSL:NYSE) )was spun off from Motorola (MOT:NYSE) in 2004. ...