Investing
Mika Arai
The IPO window is open again. Companies that stayed private for years are listing, and more are lined up behind them.
Here's a primer on what happens when one goes public.
We use SpaceX's June listing as the running example. It was the largest IPO in years, and its price swung further in eight weeks than most new stocks do in a year, so the mechanics are easy to follow. A smaller listing would show the same steps on a smaller scale.
Same company. Same business. Same quarter.
What does it mean for a company to go public?
A share is a small piece of ownership in a company. Private companies have shares too, but they're held by a small circle — founders, staff, and the investment funds that backed them.
P.S. There's no easy way to buy or sell them.
An initial public offering, or IPO, is the moment that changes. The company sells a batch of shares to outside investors and gets listed on a stock exchange, where anyone can trade them from then on.
Companies do this for two reasons. The company itself can raise money to spend on the business. And the people who already own shares finally get a way to sell some of them.
IPO offer price vs opening price: what's the difference?
Each of the four SpaceX numbers above came from a different process.
The offer price of $135 was negotiated between the company and its investment banks the night before trading began. Banks are hired to set the price and find buyers, and only the investors they hand shares to actually pay that price.
The opening price of $150 was the first price at which anyone could buy on the exchange. Nobody set it. It came out of the buy and sell orders that piled up overnight.
The closing price of $160.95 was where the stock landed after a full day of trading. Everything after that is the market changing its mind.
$135 was negotiated. $150 was discovered. Keeping those two apart is most of the work.
What is an IPO float, and why does it matter?
A company doesn't sell itself when it goes public. It sells a portion of its shares, and that portion is usually small.
Those shares come from two places. Primary shares are newly created by the company, and the cash goes into the business. Secondary shares are sold by people who already hold them, and that cash goes to those sellers rather than to the company.
SpaceX put about 639 million shares into public hands. It had roughly 13.2 billion shares in existence altogether, counting all the ones still held privately. So slightly under 5% of the company could actually be traded.
The tradable portion has a name: the float. When only a sliver of a company can change hands, a rush of buyers moves the price a long way fast. The same thinness makes the falls steeper when buyers step back.
So the first few days of trading often tell you how few shares were available, not what the business is worth.
How does the IPO process work, from S-1 to listing?
The bell-ringing ceremony takes four minutes. The work behind it takes six months to a year.
It starts with a long document called an S-1, filed with the Securities and Exchange Commission — the SEC, the US government agency that regulates financial markets. If you're thinking of buying, the S-1 is the most useful thing you'll read: audited accounts, who owns what, which customers the revenue depends on, what the money will be spent on, and a long section listing everything that could go wrong. It's written by the company and its lawyers, so treat it as disclosure rather than as a verdict.
The SEC sends back questions and the company revises. Management and its bankers then spend a week or two meeting large investors, who say how many shares they might want and roughly what they'd pay.
On the final evening, the company and its banks fix the price and decide who gets shares. Big institutions — pension funds, asset managers — take most of it. Some deals hold back a slice for individuals through participating brokerages. SpaceX reserved close to a third of its offering that way, well above what's typical.
What is an IPO pop, and who actually gets it?
The jump from the offer price to the first-day close is called the pop, and it's been remarkably consistent over time. Across more than nine thousand US IPOs since 1980, Jay Ritter's dataset at the University of Florida puts the average first-day gain at 19%.
The middle value is only 7%, though. When the average sits well above the middle, it means a small number of enormous debuts are pulling it upward, and the typical IPO does considerably less than 19%.
Whoever holds shares at the offer price collects that gain. Overwhelmingly, that's institutions. If you buy once trading opens, you start at the market price instead.
Figma shows how wide the gap can get. It sold shares at $33 in July 2025 and closed its first day at $115.50 — a 250% gain, and the number every headline used. But the first trade on the exchange happened at $85. Buy at the open and you made about 36% that day, not 250%. Everything between $33 and $85 went to the investors who'd been handed shares the night before.
Figma is an extreme case. It still shows that "buying an IPO" describes two different transactions with different starting prices and different odds.
What is an SPV, and what happens to it when the company IPOs?
Some people own a stake in a company before it goes public. Often that's through a fund set up to hold shares in one single company — the industry calls it a special purpose vehicle, or SPV. You own a piece of the fund, and the fund owns the shares.
The shares may be under a lock-up or other restrictions on selling.The fund holds the shares rather than you, so you don't decide when they're sold. Some funds hand the public shares out to their investors once restrictions are lifted. Others sell them and send cash. A manager may wait for legal, tax or administrative work to finish before doing either.
What that leaves is a gap between the price on the screen and the price you can actually get.
Before a company you hold goes public, find out:
Who decides when the shares are sold
Whether you'll receive shares or cash
What restrictions apply, and when they expire
Whether the manager still takes a cut of the profits (this is called carried interest)
What tax paperwork follows
Those answers are in your fund documents and the manager's updates, not in anything the company publishes.
What is an IPO lock-up, and what happens when it expires?
Most of a company's shares can't be sold right after it lists. A lock-up (which is a contract, not a law) stops insiders and early shareholders from selling for a set period, usually around 180 days. So the opening price forms while the bulk of the shares are frozen.
When a lock-up expires, all of them become sellable at once. Some companies now stagger the release across several dates instead. SpaceX's first batch freed up more shares than its entire original float, about one and a half times as many.
That sounds like it should have crushed the price. The stock rose 6%.
Being allowed to sell isn't the same as selling. Some holders keep their shares; others sell to spread their money around or cover a tax bill. And because the date is published well in advance, buyers see it coming.
Which is the useful part: you can look the schedule up before you buy.
Do IPOs beat the market over time?
Researchers have found repeatedly that newly public companies, taken as a group, have trailed the wider market over longer periods. The worst results cluster among companies that are listed at very high prices relative to their revenue or profits.
That doesn't make every IPO a bad investment. It means the business and the price are two separate questions. A company can grow quickly and still lose you money if the price you paid already assumed years of near-perfect performance. A duller company can do better simply because its price left room to disappoint.
The comparison is harsher for individual investors, who mostly can't buy at the offer price. Your real starting point is the opening trade, or something later.
Pre-IPO investing checklist: 5 questions before you buy
☐ Am I buying shares, or a stake in a fund that holds them? Usually the latter. Most private deals are structured as an interest in an SPV that holds the shares. The shares belong to the SPV. You own a claim on it.
☐ What sits between the company's valuation and my return? Two things, taken at two different times. Management and admin fees come out along the way, often deducted from your investment upfront. Carried interest — the manager's share of the gains — is taken at the end, out of whatever the sale actually produces, and only if there are profits. Ask about both.
☐ Who decides when to sell, and when do I get paid? The manager controls timing. Ask whether you'll receive shares or cash.☐ What price will I get? Not the one on the screen the day it lists. Nothing can be sold until the lock-up expires, and the manager chooses when to sell after that. Your price is whatever the market pays on that later date.
☐ What will I be told while I hold? How often valuations and updates arrive, and when tax paperwork lands each year.
Buying on the exchange instead? Then the offer price, the float, and the lock-up schedule are what to look at — all covered above.
An IPO is a milestone. The company gets a public price and easier access to capital. Employees can sell stock they've held for years. Early investors finally get an exit.
If you hold through an SPV, none of that liquidity is yours yet. The lock-up runs for months. After it expires, the manager chooses when to sell, and whether you receive shares or cash.
And the year isn't done. 2026 is already the biggest IPO year since 2021 — roughly $160.6 billion raised against a full-year record of $175 billion, with 4 months left to run. The second quarter set a record for quarterly proceeds, and the backlog behind it is deep. Anthropic has filed confidentially.
So more of these are coming, and some will involve companies you already hold. A headline valuation is what buyers paid for a small slice of the company on a single day. Your return is what someone pays for your stake on the day you're allowed to sell. Nothing guarantees the second number resembles the first.
For educational purposes only. Not investment advice. Investing in public and private markets carries significant risk, including possible loss of principal. Past performance does not indicate future results. Goodfin is a technology platform, not a registered investment adviser.
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