Define 'initial public offering (IPO)'.

The correct definition of an initial public offering (IPO) is that it is the first sale of stock by a private company to the public, typically used to raise capital. An IPO marks a significant transition for a company, as it moves from being privately held to publicly traded, allowing the company to raise funds from public investors. This influx of capital can be used for various purposes such as funding expansion, paying off debt, or investing in research and development.

One key aspect of an IPO is that it provides an opportunity for early investors and insiders to monetize their investment, while also allowing the company to gain exposure and credibility in the market. By becoming publicly traded, the company is subject to regulatory scrutiny and must adhere to reporting requirements set forth by regulatory bodies like the Securities and Exchange Commission (SEC).

The other options describe different scenarios in the financial markets that do not pertain to the IPO process. For instance, issuing new bonds is a form of debt financing, secondary sales refer to transactions where existing shares are traded among investors rather than being newly issued, and stock offerings exclusively to institutional investors do not involve a public sale, which is a defining characteristic of an IPO.