The IPO Process Explained: How Companies Go Public Step by Step

An initial public offering (IPO) is the process by which a private company first sells shares to the public and lists them on a stock exchange. It's one of the biggest milestones in a company's life: it raises capital, gives early investors and employees a way to sell shares, and subjects the company to public scrutiny and regulation. In 2025 and 2026, companies such as Cerebras, Klarna, Figma, Circle and Fervo Energy went public, while others including Kraken, Strava and Discord filed confidentially. This guide explains each step of the IPO process, the alternatives, the costs and what going public means for founders, employees and investors.

Step 1: Deciding to go public

Companies consider an IPO when they have reached sufficient scale, predictable revenue and, ideally, profitability or a clear path to it. Common reasons include raising large amounts of capital, providing liquidity for investors and employees, using publicly traded stock for acquisitions, and raising the company's profile with customers. Reasons to wait include volatile markets, the cost and effort of public reporting, and the desire to keep operating without quarterly scrutiny. Many large companies now stay private for a decade or more, using tender offers to provide liquidity; see our guide to tender offers.

Step 2: Getting ready

Preparation often begins one to three years before listing. Companies strengthen their finance teams, often hiring a chief financial officer with public company experience; upgrade accounting systems and internal controls; complete audits under public company standards; appoint independent board members and form audit and compensation committees; and adopt policies on governance, insider trading and disclosure. In the US, the Sarbanes-Oxley Act requires public companies to maintain and certify internal controls over financial reporting.

Step 3: Choosing banks and advisers

The company selects investment banks to underwrite the offering, typically with one or more lead "bookrunners" such as Goldman Sachs, Morgan Stanley or JPMorgan and several other banks. It also hires lawyers, auditors and investor relations advisers. The banks help decide the exchange, timing, offering size and structure, and later market the shares to investors.

Step 4: Filing the registration statement

In the United States, the company files a registration statement, Form S-1 (or Form F-1 for foreign companies), with the Securities and Exchange Commission. It contains the prospectus: a detailed description of the business, risk factors, audited financial statements, management's discussion of results, executive pay, major shareholders and how the money will be used. Most companies first submit a confidential draft, which lets them work through the SEC's review privately; they must make the filing public at least 15 days before the roadshow begins. Other countries have similar processes, such as filing a draft red herring prospectus with SEBI in India or a prospectus with the Capital Market Authority in Saudi Arabia.

Step 5: Regulatory review

The SEC reviews the filing and sends comments asking for clarifications or additional disclosure. The company responds and amends the filing, often in several rounds over a few months. The SEC doesn't judge whether the investment is good; it checks that disclosure is complete and not misleading.

Step 6: The roadshow and book building

Once the filing is public and the price range set, executives and bankers market the shares to institutional investors through the roadshow, a series of presentations and meetings, now often held virtually. Investors indicate how many shares they'd buy and at what price, a process called book building. Strong demand can lead the company to raise the price range or increase the number of shares; weak demand can force a lower price or postponement.

Step 7: Pricing and allocation

The night before trading begins, the company and its banks set the final IPO price and allocate shares to investors. Pricing involves trade-offs: a higher price raises more money for the company, while a slightly lower price can produce a first-day "pop" that rewards investors and builds goodwill, though critics argue large pops mean the company left money on the table. Banks often have an option to sell extra shares, the "greenshoe", to help stabilise trading.

Step 8: Listing day

The shares begin trading on the exchange, such as the Nasdaq or New York Stock Exchange in the US. The opening price is set by market supply and demand and can differ greatly from the IPO price. Cerebras's 2026 listing, for example, opened far above its offer price. The company receives the proceeds from the shares it sold, minus underwriting fees.

Step 9: Life as a public company

After listing, the company must publish quarterly and annual reports, disclose material events promptly, hold shareholder meetings and comply with exchange and securities rules. Insiders, including employees and pre-IPO investors, are usually subject to a lock-up period, often 90 to 180 days, during which they can't sell shares. When lock-ups expire, share prices can fall as more stock becomes available. Analysts at banks begin publishing research after a quiet period.

Alternatives to a traditional IPO

• Direct listing: the company lists existing shares without selling new ones or using underwriters to set a price; Spotify and Slack used this route. It avoids dilution and some fees but doesn't raise new capital in its basic form.
• SPAC merger: a special purpose acquisition company, a shell listed to buy a private company, merges with the startup, taking it public. SPACs boomed in 2020 and 2021 but many resulting companies performed poorly.
• Listing via a listed company: some companies list by merging into or becoming a subsidiary of an existing listed company, as Infra.Market has explored through Shalimar Paints in India.

How much does an IPO cost?

Underwriting fees in the US typically range from about 4% to 7% of the money raised, lower for very large deals. Legal, accounting, exchange, printing and other costs can add millions of dollars, and ongoing public company costs, including audits, compliance, investor relations and insurance, add more each year. Many companies consider these costs worthwhile for access to public capital and liquidity.

What an IPO means for employees

For employees with stock options or restricted stock units, an IPO can turn paper wealth into sellable shares, but usually only after the lock-up ends. Tax consequences depend on the type of equity and timing. Employees should understand their vesting schedules, exercise costs, lock-up dates and tax obligations, ideally with professional advice. Our guide to selling startup shares before an IPO covers pre-IPO options.

What an IPO means for investors

For venture and growth investors, an IPO provides a path to return money to their own investors, though they often sell gradually after lock-ups. For public market investors, IPOs offer access to fast-growing companies, but IPO shares can be volatile and early performance varies widely. Comparing the IPO price with the last private valuation is a common way to judge whether private investors made money; some companies list below their peak private valuations. Our guide to investing in pre-IPO companies explains how individuals can gain exposure earlier.

How long does an IPO take?

From hiring banks to listing typically takes six months to a year, after one to three years of internal preparation. Market conditions can pause plans at any point; many companies that filed confidentially in 2025 or 2026 have delayed listings while waiting for better conditions.

Dual-class shares and founder control

Many technology companies list with dual-class share structures, giving founders shares with extra voting rights so they keep control after selling a large portion of the company. Supporters say this lets founders pursue long-term strategies; critics argue it reduces accountability to shareholders. Some index providers and investors limit their exposure to companies with unequal voting rights. Prospective investors should check the share structure in the prospectus.

Pricing an IPO

Bankers set the initial price range by comparing the company with similar listed companies, considering growth, margins and market conditions. Investor feedback during the roadshow then determines the final price.

Companies also choose the size of the offering, balancing the capital they need against dilution for existing shareholders.

A larger offering raises more money but sells more of the company.