An IPO stands for Initial Public Offering. It is the point in which a company sells common stock to the public. Money raised from an IPO goes to the company directly as opposed to the trade of stock that is already being bought and sold.

For the public, purchasing stock through an IPO has greater risks than investing in stock. The Company may not be strong enough to maintain a competitive edge in the world of public companies; therefore the stock price may immediately plummet.

The purpose of selling stock to the public is to raise capital, which could be used to for mergers and/or acquisition. Depending on what a Company's long-term objects are, it might consider merging with a company that is already publicly held. The decisions to influence this type of transaction could be that the Company is not strong enough for the public to have an interest in purchasing the stock. The Company may not be able to get the price it wants from the sale of stock through an IPO.

Since an IPO is an equity transaction there are no financing considerations for the IPO itself. Other financing considerations for a merger or acquisition would be financing in the form of bank loans or bond issues, which would have to be repaid with interest. Additional investments from the owners, in the case of non-public companies, would also be a consideration, but this would be considered an equity transaction.