What Is an IPO? Initial Public Offering Explained

What Is an IPO? The stock market brings together investors and companies looking to finance their growth by selling securities. It is a financial marketplace where transactions are carried out essentially in shares. When a company lists on a stock market to sell its shares, it is said to go public. But what is an IPO, and how does the process work? Here is everything you need to know about a company’s initial public offering.

What Is an IPO?

• An IPO, short for Initial Public Offering, is a financial operation that allows a company to sell its equity securities, or shares, on a stock market. This opening of the company’s capital to the public and to a wide range of potential investors (employees, retail investors and institutions) is a fairly long and complex operation to set up.
• As a result, only companies with a sufficiently substantial turnover can qualify. Going public allows businesses large and small to open their capital to new investors (institutional, individual or employee) in order to finance their projects, accelerate their growth or raise their profile.

Why Do Companies Go Public?

Several reasons can push a company to enter the Stock Market. It depends largely on the circumstances. Most companies that go public aim to raise capital and strengthen their funds. Some want to pay down debt, attract and retain talent, or monetize assets. A company may also want to go public to improve its public image.

Types of IPOs

1. The public offering: This is the most widely used method for listing a company’s shares and making them available to retail and institutional investors. It is also the route to know for anyone learning how to invest in an IPO.
2. The private placement: This type of placement involves selling shares directly to a pre-selected category of investors. A private placement is faster and more economical than a public offering. The drawback, however, is that it brings the company less visibility and liquidity.
3. The technical listing: It consists of allowing the shares of a company that has not raised any capital (through neither a public offering nor a private placement) to be quoted. Often likened to a direct listing, it secures the company’s recognition and visibility.

The Biggest IPOs in History

Several upcoming IPOs are in the pipeline, and the next public offerings therefore span a wide range of sectors. The ones listed above are the best known and most widely announced.

Requirements for Going Public

Listing on the stock market subjects a company to a much heavier set of regulations than unlisted businesses face. Listing approvals are granted by the Autorité des Marchés Financiers (AMF). The AMF carries out statutory or contractual compliance checks and issues the approvals. Among the rules to be followed, the company must:

1. Provide annual accounts and detailed, 100% transparent financial statements,
2. set its opening price below a certain proportion of the minimum purchase price,
3. allocate a minimum quota of shares to investors,
4. sell shares to retail (non-professional) investors for at least 10% of the share capital (a percentage that varies depending on the target market)

AMF approval to go public is subject to further rules depending on the type of market targeted.

1. Companies targeting Eurolist must produce consolidated accounts certified by a statutory auditor over a minimum period of 3 years before the application,
2. companies wishing to list on Euronext Growth must comply with the accounting obligations set by the Commission des Opérations en Bourse (COB),
3. firms that want to be listed on Euronext Access must hold equity of at least 1.5 million euros and issue at least 10,000 shares representing a minimum of 20% of the capital or 5 million euros.

Ultimately, it is the targeted stock market that decides whether to accept the company’s application to go public, after review and approval by the AMF.

Recent IPOs and Upcoming Public Offerings

1. Reddit: This is an online platform that became popular thanks to its discussion communities. It ranks among the 20 most visited websites in the world.

• On Reddit, users can post anonymous messages, discuss any topic and vote for their favorite comments.
• Reddit is visited daily by around 52 million users.
• The company is valued at $10 billion, but expects to reach $15 billion by the time of its new IPO.
• Reddit is actively preparing to go public.

2. Tiktok: The date of its upcoming IPO has yet to be set. TikTok’s preliminary valuation stands at $50 billion.

3. Starlink: It offers high-speed satellite internet services, even in the most remote parts of the world.

• As of November 2025, 1,842 satellites had been placed into orbit.
• Investment in Starlink has exceeded the $10 billion mark.
• The date of the company’s upcoming IPO depends on its financial indicators.
• The company’s market capitalization stands at $72 billion in 2025.
• A total investment of $20 billion is planned for the project.

4. Discord: The company offers its users a free messaging service with access to voice and video conferencing. It is valued at $7 billion, although Microsoft offered $10 billion for the company. The messaging service’s total audience has exceeded 140 million users. Since spring 2025, active preparations for the next IPO have been under way. The listing date therefore remains to be determined.

Should You Buy IPO Stocks? Advantages and Disadvantages of an IPO

Why Go Public?

• Increase its funding options – More and more investors today perceive or misinterpret the listing of certain companies. There are in fact several reasons that explain why a company goes public. The first is the increase in its funding possibilities. Indeed, most companies go public with the aim of multiplying their funding options. The stock market represents a better alternative for any company looking to grow its capital or raise funds. It is safer than traditional financing channels such as banking networks. Going public allows companies to stand on their own. For some mid-sized companies, a stock market listing is far more advantageous. This is because it is a simpler way for those who run them to reinvest.
• Making it easier and simpler to hand on the business – Many companies have been destroyed because of succession problems. Today, however, the stock market plays a major role in the long-term survival of listed companies. Indeed, a listing makes it easier to settle inheritance duties. In doing so, it guarantees that control of the company is preserved.
• Growing tired of certain partners – Going public is far more advantageous for these shareholders. Since they do not work within the company, they are deprived of dividends for long periods. As long as the company decides to reinvest its profits into its own development, only the largest investors benefit from it. Minority investors therefore have the option to exit at any time. It is important for every venture capital investor to plan an exit route when investing in a company. With this in mind, most of these investors put their money into listed companies in order to capture a substantial capital gain.
• Raising its profile – Going public has a major impact on a company’s image. To increase its visibility among investors, new customers or partners, any company must go public. It is the most important step for securing its future and strengthening the perception of its image. It also helps enhance the value of the brand. Thanks to this, the company gains recognition from the business and financial press. One way or another, it represents a new stage in the development of any company.
• Improving the quality of management – In general, being listed on the stock market is beneficial for the quality of management of any company. It exposes the business to many influential people. The company is valued and is required to adopt a communications policy. Exposed to the world, it is bound to greatly improve its image and identity.

Read also: Stock Brokerage Firm and Best IPO

The IPO Process: How IPOs Are Priced

1. The OPO (Open Price Offering): This is the most widely used procedure. The company that wishes to go public first selects a financial institution. The latter is then mandated to put together a banking syndicate. The syndicate must then handle the placement of a certain quantity of shares with institutional investors.
2. The OPF (Fixed Price Offering): In this case, the company and the financial intermediary define the number of shares to be put into circulation on the market and their sale price. The quantity of shares to be delivered is then determined on the basis of the orders received, on the one hand from retail investors and on the other from institutional investors.
3. The OPM (Minimum Price Offering): The shares are put up for sale at a minimum price. The prices are then determined according to the orders received. The number of orders received for each price bracket determines the quantity of shares to be delivered.
4. The CD (Direct Listing): At this stage, the number of shares and their minimum purchase price are determined in advance. This is the key procedure to understand when comparing IPO vs direct listing. Investors are then allowed to place limit orders. Once these orders have been received, two conditions must be met for the new listing procedure to be validated. The first requires that the first quoted price of the share does not exceed a certain percentage of the minimum purchase price. The second condition requires that each investor receives a minimum quantity of shares.

This article is for educational purposes only and does not constitute investment advice. The investments mentioned carry a risk of loss of capital.