From private to public — in one day
Imagine you have built a successful company over 10 years. It is growing, making money and ready for the next step. You need capital to expand globally. The solution? Sell shares to the entire world — and get listed on the stock exchange. That is an IPO.
"The greatest opportunities always come disguised as moments of uncertainty. The IPO is exactly that — exciting and unpredictable."— Florence Scovel Shinn
How does an IPO work?
1. Preparation
The company hires investment banks as underwriters. Accounts are thoroughly audited. Legal structures are cleaned up. This can take 1-2 years and costs millions.
2. Valuation
Underwriters calculate what the company is worth and set a price range for the shares. They talk to large institutional investors to test interest — called bookbuilding.
3. Prospectus
A detailed document — the prospectus — is published with all information about the company, risk factors, financials and use of proceeds. This is your most important source of information as an investor.
4. Roadshow
Management travels the world presenting the company to large investors. Banks, pension funds and insurance companies decide whether to invest and at what price.
Historical IPOs — winners and losers
Google 2004 — Winner
Listed at $85. Today over $170 after two stock splits. An investment of $10,000 in 2004 is worth over $400,000 today.
WeWork 2019 — Loser
Valued at $47 billion privately. The IPO collapsed when investors realized the business model did not work. Ended in bankruptcy. One of history most spectacular IPO failures.
Kahoot 2019 — Norwegian winner
Norwegian quiz platform listed on Euronext Growth. Sold in 2023 for $1.72 billion. From NTNU student project to billion-dollar acquisition.
IPO traps to avoid
Hype without substance
IPOs are always sold on the best stories and most optimistic forecasts. Read the risk chapter just as carefully as the growth story.
Lock-up period
Existing shareholders — founders and employees — cannot sell for 6-12 months after listing. When the lock-up expires many sell. The price often falls then.
Statistics: Studies show that the majority of IPOs underperform the market in the first 3-5 years after listing. The best exceptions — Google, Amazon — are just that: exceptions, not the rule.
"The greatest opportunities always look risky from a distance. Approach them with knowledge — and the risk melts down to a sensible choice."— Florence Scovel Shinn