§ 01
| IPO Phase | What Happens | Duration |
|---|---|---|
| S-1 filing | Company files detailed prospectus with SEC | Weeks to months of SEC review |
| Roadshow | Management pitches to institutional investors | 1–2 weeks |
| Book building | Banks collect demand at various prices | During roadshow |
| Pricing | Final price set (often below demand to create ‘pop’) | Night before trading |
| First day trading | Stock opens, often 20–50% above IPO price | Day 1 |
| Lock-up expiry | Insiders can sell (typically 90–180 days) | 3–6 months post-IPO |
§ 02
The first-day ‘pop’ is money left on the table by the company. If a stock prices at $20 and opens at $30, the company raised $10 less per share than it could have. Banks underprice to reward their institutional clients, not the company.
§ 03
Look at recent IPOs and compare the offer price to the first-day close. The average IPO pop is 15–25%. This represents a transfer of wealth from the company to IPO allocators.
§ 04
An IPO prices at $25 and closes Day 1 at $40. Retail investors who buy at $40 are paying:
§ 05
§ 06
A company files S-1 targeting a $5B IPO valuation. Revenue: $500M, growth 40%. Comps trade at 6x revenue. The banker pitches 10x on 'growth premium.' How should you read this?
Five questions · AI feedback
Sit with the ideas.
A company prices its IPO at $28 per share, raising $700 million (25 million shares). On the first day of trading, the stock closes at $42. How much money did the company 'leave on the table'?
Why: