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Initial public offerings (IPOs)
· Concept
Fact, law or dataA rule, statute, definition or measured number.
An IPO is when a private company first sells shares to the public and lists them on a stock exchange.
See it on the Money & Finance map →How it works
The company hires investment banks, files a registration statement (Form S-1) with the SEC disclosing its finances and risks, then pitches big investors on a 'roadshow'. The price is set the night before trading; most shares go to institutions. Banks typically take about 7% of proceeds on midsize deals, less on big ones. Insiders usually cannot sell for 90 to 180 days. First-day gains have averaged about 18% since 1980. Alternatives include direct listings (Spotify, 2018) and SPAC mergers.
Why it matters
IPOs turn private stakes into tradable shares, letting founders and venture investors cash out and companies raise growth capital; IPO frenzies often mark market tops.
Facts, rules and data
S-1 filings are public on the SEC's EDGAR database. Professor Jay Ritter's University of Florida data on US IPOs since 1980 document first-day pops and later underperformance.
Debates and risks
Why companies accept large first-day 'pops' that leave money on the table, and why IPO stocks often lag the market for years afterward, is debated.
Connections (8)
▸Investment banks: underwriting, deals and trading underwrite Initial public offerings (IPOs)Fact, law or data
The connection
Investment banks run the IPO: they advise on timing and price, draft the SEC filing, market shares to big investors on a roadshow, gather orders, and set the price. In a 'firm commitment' deal they buy the shares and resell them, earning a fee, typically about 7% on midsize deals, plus an option to sell 15% extra.
When and why
Wall Street firms such as Goldman Sachs, Morgan Stanley and JPMorgan lead most large US IPOs; Morgan Stanley led Facebook's in 2012.
How we know
Every prospectus names the underwriters and their fees; economists Chen and Ritter documented the clustering of fees at 7% in 2000.
Debates and risks
Whether banks underprice IPOs on purpose to reward favored clients with first-day gains, and why fees stay clustered at 7%, is debated.
▸Initial public offerings (IPOs) list companies on Stock exchanges: NYSE and NasdaqFact, law or data
The connection
An IPO ends with a listing. The company picks the NYSE or Nasdaq, meets its rules on share price, market value, public float and an independent board and audit committee, and pays listing fees. On day one the exchange runs an opening auction to set the first trade. Exchanges compete hard for big listings.
When and why
Examples: Facebook on Nasdaq in May 2012, whose glitchy debut cost Nasdaq a $10 million SEC fine; Alibaba on the NYSE in September 2014.
How we know
Listing standards are filed with and approved by the SEC; exchange records list every new listing and its first trade.
Debates and risks
Why the number of US-listed companies has roughly halved since the late 1990s, as firms stay private longer with venture and private equity money.
▸Initial public offerings (IPOs) is a classic payday for Venture capitalMainstream view
The connection
VC gains sit on paper until an exit. In an IPO, the startup's shares begin trading publicly; after a lockup, usually 180 days, the fund can sell or hand shares to its investors. Hot IPO markets, as in 1999 and 2021, let VCs show profits and raise new funds; cold ones stall them.
When and why
Classic cases: Apple (1980), Google (2004) and Facebook (2012), each enriching early VC backers such as Sequoia, Kleiner Perkins and Accel.
How solid is the link?
PitchBook-NVCA data show exit values and VC fundraising rising and falling with the IPO market.
Debates and risks
Companies now stay private far longer, and most exits are acquisitions; whether IPOs remain VC's main payday is uncertain.
▸Dot-com bubble and bust (2000) was fueled by a frenzy of Initial public offerings (IPOs)Fact, law or data
The connection
IPOs turned internet hype into cash. Nearly 500 companies went public in 1999, many without profits, and first-day gains averaged about 70%. Each pop drew more investors and more listings, until the Nasdaq broke in 2000 and the IPO window slammed shut.
When and why
US markets, from Netscape's August 1995 debut to the 1999–2000 peak in listings.
How we know
Jay Ritter's IPO database records the counts and first-day returns; a 2003 SEC settlement with big banks documented biased analyst research.
Debates and risks
Whether huge first-day pops reflected banks rewarding favored clients with hot shares or plain investor frenzy is debated.
▸Securities Act of 1933 and Exchange Act of 1934 require disclosure for Initial public offerings (IPOs)Fact, law or data
The connection
A company going public must file a registration statement (Form S-1) with audited financials, risks, executive pay and use of proceeds, and give buyers a prospectus. The SEC reviews it for completeness, not merit. Directors and underwriters are liable for misstatements, which is why underwriters run heavy due diligence.
When and why
Since 1933; the 2012 JOBS Act let smaller 'emerging growth companies' file confidentially and test investor interest before going public.
How we know
Every IPO's S-1 and prospectus are public on the SEC's EDGAR database; Section 11 of the 1933 Act sets liability for false statements in them.
Debates and risks
Whether disclosure costs help explain why US-listed companies fell from about 8,000 in the late 1990s to about 4,000, as firms stay private longer, is debated.
▸USD Coin (USDC) and its issuer, Circle listed on the NYSE in a 2025 Initial public offerings (IPOs)Fact, law or data
The connection
Circle's shares began trading on the New York Stock Exchange on June 5, 2025, priced at $31, above its marketed range, raising about $1.1 billion. The stock closed its first day near $83, up about 168%. Public investors can now own a stablecoin business whose profits track short-term interest rates.
When and why
New York, June 2025, six weeks before the GENIUS Act became law; ticker CRCL.
How we know
Circle's SEC registration statement and NYSE trading records.
Debates and risks
Whether Circle's valuation holds as rates fall and as it keeps sharing revenue with distributors such as Coinbase.
▸Hong Kong Exchanges (HKEX) and the Hang Seng index is a top global venue for Initial public offerings (IPOs)Fact, law or data
The connection
Hong Kong lets mainland firms sell shares to global investors in a free-flowing currency. After 2018 rule changes allowed pre-profit biotech firms and dual-class shares, listings grew. In 2025 HKEX raised about $35 billion from IPOs, more than any exchange, including CATL's roughly $5 billion offering.
When and why
Hong Kong, notably 2019 (Alibaba's secondary listing) and 2025, when many A-share companies added Hong Kong listings.
How we know
HKEX year-end statistics and LSEG, Dealogic and KPMG league tables, which differ slightly on totals.
Debates and risks
Whether the IPO boom lasts, given its dependence on mainland companies and Beijing's approval of overseas listings.
▸Saudi Exchange (Tadawul) and the 2019 Aramco IPO hosted the record 2019 Aramco Initial public offerings (IPOs)Fact, law or data
The connection
Aramco sold 1.5% of its shares on Tadawul in December 2019 at 32 riyals each, raising $25.6 billion, and $29.4 billion with an over-allotment option: the largest IPO ever, beating Alibaba's $25 billion in 2014. Most buyers were Saudi and Gulf investors after foreign demand proved weak at the $1.7 trillion valuation.
When and why
Riyadh, trading from December 11, 2019; the state kept about 98.5%, and a June 2024 follow-on sale raised about $11–12 billion.
How we know
Aramco's prospectus and stabilization notices, Tadawul records, and league tables from Dealogic and LSEG.
Debates and risks
Whether the valuation was truly market-set, given pressure on locals to buy, and whether future state sales will find foreign buyers.