An Initial Public Offering (IPO) is the first sale of a company’s stock to public investors through a regulated exchange listing, converting it from a private to a public company.

How it works

The company hires investment banks as underwriters to price and market the offering. Management roadshows pitch institutional investors who commit to buying shares at the offer price. Upon listing, shares trade openly; the company files quarterly and annual reports with the SEC. Existing shareholders — founders, employees, and VCs — typically face a lockup period, often 180 days, before selling freely. Proceeds may go to the company for growth or to selling shareholders for partial liquidity. Direct listings and SPAC mergers offer alternative paths to public markets with different mechanics. IPO windows open and close with market sentiment; many companies delay or choose to stay private longer when public comps trade poorly.

Why it matters

• Founders: IPO brings capital and currency for acquisitions but adds reporting burden, scrutiny, and short-term market pressure on the stock price.
• Investors / LPs: IPOs are a primary VC exit route returning capital to funds; IPO pop and post-lockup trading affect realized returns.

Common mistake

Assuming IPO equals full liquidity for all insiders on day one. Lockups and trading volume limit how much stock converts to cash immediately.

Related ideas

SPO, direct listing, lockup, in-kind distribution, and secondary offerings follow IPO mechanics.