IPO (Initial Public Offering)
IPO — Initial Public Offering#
Definition#
An IPO (Initial Public Offering) is the process by which a private company goes public by selling its shares to investors for the first time. The IPO allows the company to raise capital and lets founders and early investors monetize part of their stake. The offer price is set by the investment banks running the deal (the underwriters).
Well-known examples include Facebook (2012, $16bn raised), Alibaba (2014, $25bn, a world record at the time), and Saudi Aramco (2019, $25.6bn). In France, recent IPOs include OVHcloud (2021) and Believe (2021). The first days after an IPO are often highly volatile — the price can surge or collapse.
Key Takeaway
Investing in an IPO is risky: the price is often high (the banks aim to maximize the raise) and information is limited (there is no trading history). Conventional wisdom is to wait 3-6 months after the IPO before investing, giving volatility time to settle and the first published results time to reveal the company's real health.
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