Public Offering Price (POP)
What it is:
How it works (Example):
When a company issues stock for the first time as part of an IPO, the underwriting investment bank is responsible for determining the stock's public offering price (POP). The POP is based on numerous variables including, but not limited to, the stock prices of similarly-valued companies in the same industry, the issuing company's growth potential and the issuing company's current value as expressed by its financial statements.
Why it Matters:
The prices of stocks established in the market are determined by supply and demand. A POP, by contrast, is determined by fiat and reflects how a few individuals believe a share's worth of a company should be valued rather than what investors would necessarily be willing to pay based on market forces.