How does a company go public?

Hook

Why and how does a company go public? You hear it all the time. A big company is planning an IPO, and suddenly anyone can buy a piece of it. Here's what actually happens.

Private

Before an IPO, a company is private. Its shares are owned by founders, employees and investors like venture capital firms. You can't just buy them on a stock app.

Ipo

IPO stands for initial public offering. It's the first time a company sells its shares to the general public, usually to raise money and let early owners cash out over time.

Banks

Investment banks run the process. They help the company file paperwork with the Securities and Exchange Commission, meet big investors, and figure out how much demand there is.

Price

Then the IPO price gets set, usually the evening before trading starts. Most of the shares go to big institutional investors at that price.

Pop

The next day, the stock starts trading on an exchange like the New York Stock Exchange or Nasdaq. If demand is high, the price can jump on day one. If not, it can fall below the IPO price.

Lockup

Insiders usually can't sell right away. A lockup period, often around six months, keeps founders and early investors from dumping their shares all at once.

Close

So an IPO is when a private company sells shares to the public for the first time, with banks setting the price and an exchange where anyone can trade. ThatsWhyHow.