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Going public: the IPO

How a private company starts selling its shares on the stock market.

Click any word with a dotted underline to see what it means.

Most companies start out private: their shares belong to founders, employees and early investors, and can't be bought on the stock market. An , or IPO, is when a company sells to the public for the first time and they start trading on an exchange.

Why companies go public

  • To raise money to grow, pay off debt or invest in new projects.
  • To let founders, employees and early investors sell some of their shares.
  • To become better known, and to be able to pay with shares, for example when buying another company.

How it works

The company hires investment banks to help set a price and find buyers, and files a detailed registration document with the SEC describing the business, its numbers and its risks. On the first day of trading, the price is set by buyers and sellers and can end up far above or below the IPO price. Nubank, for example, set its IPO price at $9 per share and started trading on the NYSE in December 2021.

Life as a public company

Once public, a company must publish its results regularly, including a detailed , so anyone can study it. That is what makes sites like StockLab possible. The company also answers to many more shareholders, and its can be seen every trading day.

Keep in mind

A newly listed company has a short public track record, and its share price can move sharply in its first months and years. The attention around an IPO says little about how the business will do over the years.