When a company issues shares to the public for the first time, that is we called Initial public offering. They are sometimes issued by smaller, younger companies seeking capital to expand, but can also be done by large privately-owned companies looking to become publicly traded.
In an IPO listing the issuer may obtain the assistance of an underwriting firm, which helps it determine what type of security to issue, best offering price and time to bring it to market.
An IPO may be a risky investment. It is difficult to predict what shares will do on its initial day of trading and in the near future since there is often little historical data with which to analyze the company. A company which is planning an IPO appoints lead managers to assist it decide on an appropriate price at which the shares should be issued. There are two ways in which the price of an IPO can be determined, either the company, with the help of its lead managers, fixes a price is arrived through the process of book building.