What is an IPO?

An IPO, Initial Public Offering is the process by which a private company sells shares to the public for the first time and becomes listed on a stock exchange. It is the moment a business transitions from being owned by a small group of founders, employees, and private investors to being partially owned by anyone who wants to buy a share.

Why do companies go public?

The main reason is to raise money. Selling shares to the public generates capital that can be used to fund growth, pay down debt, or expand into new markets. Going public also gives early investors and employees a way to sell their stakes and realise the value they have built. It raises the company's profile and can make it easier to attract talent and partners.

How does the process work?

The company hires an investment bank to manage the IPO. Together they determine how many shares to sell, at what price, and on which exchange to list. Before the shares go on sale, company leadership typically embarks on a roadshow: a series of presentations to large institutional investors to generate interest. On the day of the IPO, shares begin trading on the exchange and the public can buy them through a broker.

Should beginners invest in IPOs?

With caution. IPOs can be exciting but they carry specific risks. There is often limited financial history available, the initial price can be set too high due to hype, and share prices can be highly volatile in the weeks and months after listing. Many IPOs underperform the broader market in their first years. Waiting to see how a newly listed company performs before investing is often the wiser approach.

What happens to early investors?

Founders, employees, and early backers who held shares before the IPO typically face a lockup period, usually 90 to 180 days. During which they are not allowed to sell their shares. When that period ends, a wave of selling can sometimes push the share price down.