Investing term
What is IPO?
Initial Public Offering — the first time a company sells shares to the public.
An IPO (Initial Public Offering) is the first time a company sells shares to the public, moving from private ownership to a listing on a stock exchange. It lets the company raise capital to grow and gives early backers — founders, staff, and venture investors — a way to cash out some of their stake.
For ordinary investors, IPOs are often hyped and volatile. The excitement and limited early supply can push the price well past what the business is worth, and first-day pops frequently fade in the weeks that follow. Many of the best-known companies were far cheaper a year or two after listing than on their debut, which is why chasing an IPO on day one is closer to speculation than investing.
An IPO is often marketed at peak excitement. A $20 debut can spike to $45 on hype, then drift back as real results arrive — which is why chasing day one is closer to speculation.
For example
A startup goes public at $20 a share, spikes to $45 on first-day hype, then drifts back as the excitement fades — a common IPO pattern.
Learn it by doing
That's IPO in theory — it clicks when you use it. Practise it hands-on in a free, interactive lesson (Stage 5, How Markets Work Globally).
Try the free lesson →Why it matters to you
IPOs matter to everyday investors mainly as a caution: they're marketed at their moment of peak excitement, when the seller (the company and its insiders) chooses the timing and price. That asymmetry — informed sellers, hyped buyers — often makes the debut a poor entry point. Understanding that you can almost always buy the same company later, once the hype cools and real results arrive, turns a fear of missing out into patience.
⚠ Buying the hype on day one
First-day IPO prices are driven by excitement and scarce supply, not by settled valuation, and pops often fade within weeks or months. Buying at the debut means paying up at the moment sentiment is hottest and insiders are selling. For most investors, waiting to see real results as a public company beats chasing the opening surge.