Initial Public Offering
An IPO is a private firm’s first sale of stock to public investors — a liquidity and valuation event, not a proof of quality.
Definition
Bankers book-build, set a range, allocate, and list. Primary shares raise cash for the firm; secondary shares cash out existing holders. Lockups, greenshoes, and first-day pops are part of the microstructure, not the DCF.
Why it matters
IPOs reprice private marks, reset compensation, and create a free float. Underpricing is a tax paid to the listing machine.
Case
A 2021 software IPO priced at the top of an upsized range, popped 40%, and traded at half the offer a year later. The pop was allocation; the aftermarket was the valuation.
How to read it
Split primary vs secondary, lockup calendar, and whether the story needs public-market multiples that private marks already assumed.