What is ipo?

An IPO, or Initial Public Offering, is the first time a private company sells its shares to the public on a stock exchange. It turns the company from privately owned into a publicly traded one, allowing anyone to buy a piece of the business.

Let's break it down

  • The company hires investment banks (underwriters) to help set the price and find buyers.
  • A prospectus is prepared, detailing the business, finances, and risks.
  • The underwriters market the shares to institutional investors in a “roadshow.”
  • The company decides on the number of shares and the price range.
  • On the chosen day, the shares are listed on a stock exchange and start trading publicly.

Why does it matter?

  • It provides the company with a large influx of cash to fund growth, research, or pay off debt.
  • It creates a market price for the company’s shares, giving owners a way to measure their wealth.
  • It increases the company’s visibility and credibility with customers, partners, and talent.
  • Early investors and employees can sell some of their shares, turning paper wealth into cash.

Where is it used?

  • Start‑up and tech firms that need big capital to scale quickly.
  • Mature companies looking to expand, acquire other businesses, or let founders cash out.
  • Companies in any industry that want to access public markets, from biotech to manufacturing.
  • Stock exchanges worldwide, such as the NYSE, NASDAQ, London Stock Exchange, and others.

Good things about it

  • Access to large amounts of capital that are often cheaper than bank loans.
  • Enhanced brand recognition and trust among customers and partners.
  • Ability to use publicly traded shares as currency for acquisitions or employee compensation.
  • Liquidity for shareholders, making it easier to attract and retain talent.

Not-so-good things

  • The IPO process is expensive and time‑consuming, with high legal, accounting, and underwriting fees.
  • Public companies must disclose detailed financial and operational information, reducing privacy.
  • Share price can become volatile, exposing the company to market pressure and short‑term expectations.
  • Existing owners may see their ownership diluted, and they must answer to a broader group of shareholders.