What is an IPO in simple terms: how companies go public and how to participate

IPO (Initial Public Offering) — the primary public offering of a company's shares on the stock exchange, after which its shares can be purchased by any investor, not just a select few insiders.

How IPO differs from Pre-IPO

Before going public, the company's shares are usually held only by the founders, top managers, and venture funds — this is the Pre-IPO stage. IPO is the moment when the company officially lists its shares on the stock exchange, making them available to the broader market.

Why do companies go public

The main reason is to raise capital for further development. Investors who buy shares during the IPO stage (or earlier, at Pre-IPO) hope to profit from the company's increased market capitalization after it becomes publicly traded; however, this is an expectation, not a guarantee.

What is a lock-up period

A lock-up is a period (usually 90–180 days, the exact term is specified in the conditions of a specific issuance) during which major shareholders — founders, top managers, early investors — are not allowed to sell their shares. It is introduced to prevent a sharp drop in stock prices immediately after the IPO if all early holders start selling their shares simultaneously.

Which companies are considered for Pre-IPO deals

The selection of companies for Pre-IPO typically looks at a combination of factors: the maturity of the business and a team of professionals, funding from well-known venture funds, profitability (market practice often targets a level of $100 million), growth rates of 40% per year, the public profile of the company, and the total amount of raised investments (often from $50 million, with last-round financing from $1 billion). These are guidelines, not guarantees for selecting a particular deal.

How to participate — 3 steps

1. Open a brokerage account.
2. Fund the account.
3. Submit an application to participate in a specific offering.

Risks to be aware of

IPO is not guaranteed income: after the listing, shares may rise or fall below the offering price. Past successful IPO stories do not guarantee similar results for the next company. This material is for informational purposes only and is not an individual investment recommendation.