---
title: "Initial Public Offering"
url: "https://mahouse.world/glossary/initial-public-offering"
type: "glossary term"
topic: "Capital markets"
author: "Ihor Vlasov"
reviewed: "2026-09-20"
published: "2026-08-06"
---

# Initial Public Offering

An initial public offering (IPO) is the first sale of a company's shares to public investors, after which the shares trade on an exchange: the company (and often existing holders) sells shares through underwriters who market them to institutions, build a book of demand, set the price and allocate; the company becomes subject to listing rules and continuous disclosure, and its founders and investors gain a market for their shares after a lock-up.

**Also known as:** IPO, Going public, Listing, Public offering

## Key facts

- **Used at:** companies large enough to bear public-company costs and interest institutional investors — typically revenue above $100 million and a path to profit, though the 2021 window took many earlier; fintech IPOs of note include Adyen (2018), Affirm and Coinbase (2021), Nubank (2021), and the 2024–2025 reopening with Klarna, Chime and others
- **Binding:** securities law — a prospectus or registration statement reviewed by the regulator (SEC, FCA, the EU authorities under the Prospectus Regulation), listing rules of the exchange, continuous disclosure, insider-dealing and market-abuse rules; for a regulated fintech, the sector regulator's view of the change in ownership and capital
- **Typical process:** select underwriters and advisers; prepare the prospectus and audited financials; regulator review; roadshow and book-building over one to two weeks; price at the end; allocate; first day of trading; lock-up of 90–180 days for insiders; six to twelve months from kick-off
- **Typical costs:** underwriting fees of 3.5–7% of proceeds (lower for large deals); legal, accounting and listing costs of several million; the first-day "pop" — the gap between the offer price and the first close, averaging 15–20% in the US, which is money left on the table by the seller; ongoing public-company costs of several million a year
- **Parties:** the company and its board, selling shareholders, the underwriting syndicate, the regulator and exchange, institutional investors who build the book, retail investors who buy afterwards, and the analysts whose coverage the underwriters provide

## How an IPO works in practice

A payments company with €300 million of revenue and a first profitable year appoints three banks. Over four months they prepare the prospectus — business, risks, three years of audited financials, use of proceeds — and file it with the regulator, whose comments take two rounds. The banks' analysts publish pre-deal research; the company presents to investors in a two-week roadshow while the banks take indications of interest at a price range; the book fills several times over; the price is set at the top of the range or above; shares are allocated, mostly to long-term institutions the banks favour; trading opens the next day. The company raises €400 million of new money, existing holders sell €200 million, and the founders and venture investors hold the rest under a 180-day lock-up. The stock rises 25% on day one — good press, and €100 million of value the sellers did not receive.

The alternatives and the record shape the choice. A direct listing skips the underwritten sale and the pop but raises no new money in its original form. A SPAC merger, the 2021 route for many fintechs, listed companies faster with less scrutiny and, on the evidence, worse outcomes. A sale to a strategic or a sponsor gives certainty and no public-market costs. The fintech IPO cohort of 2020–2021 — lenders, brokers, insurtechs — mostly traded far below their offer prices within two years as rates rose and growth slowed; the ones that held were profitable at listing or became so quickly. The lesson the 2024–2025 candidates took: list on profits or a credible path to them, and price for the after-market, not the first day.

For a fintech founder, an IPO is an exit that takes years of preparation — audit-grade financials, governance, a regulatory file that survives a prospectus — and delivers liquidity slowly; for a buyer, the IPO window's state sets the price of every private alternative.

## Example

A consumer-lending fintech with $450 million of revenue, growing 30%, and a first year of profit prepares an IPO for the first half of 2025. Preparation: two years of PCAOB-standard audits, a board with independent directors and an audit committee, a public-company finance team, a regulatory review of its lending licences in every state, and a 320-page registration statement. The banks propose a range of $20–23; the book reaches 12× coverage; the price is set at $25; the offering raises $900 million, half new money; day-one close $31. Six months later, after the lock-up, the stock is $27 — above the offer, below the pop — and the company's cost of the process, all in, was $62 million. Its founders sold 10% at the IPO and hold the rest; its venture investors distributed shares to their limited partners after the lock-up.

## Common mistakes

- Listing before the financials, governance and regulatory file are public-company grade.
- Pricing for the first-day pop rather than the after-market.
- Reading a SPAC merger as an IPO with less work; it was an IPO with less scrutiny.
- Underestimating the ongoing cost and the exposure of continuous disclosure.
- Founders and investors planning liquidity at the IPO rather than after the lock-up.

## Related terms

- [Direct Listing](https://mahouse.world/glossary/direct-listing.md)
- [SPAC](https://mahouse.world/glossary/spac.md)
- [Underwriter](https://mahouse.world/glossary/underwriter.md)
- [Book Building](https://mahouse.world/glossary/book-building.md)
- [Lock-Up Period](https://mahouse.world/glossary/lock-up-period.md)
- [Exit Strategy](https://mahouse.world/glossary/exit-strategy.md)

— Ihor Vlasov, M&A FinTech Expert. Last reviewed 2026-09-20. https://mahouse.world/authors/ihor-vlasov