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An IPO is the moment when a company sells shares to the general public for the first time through the stock exchange. The company officially “goes public” and becomes a listed company. From that moment on, investors can buy and sell shares of the company.
With an IPO, a company raises new capital to grow or repay debt.
Before an IPO, a company is usually owned by its founders and private investors. By going public, it sells part of its ownership in the form of shares to new shareholders.
The proceeds can be used to invest in expansion, new products or international growth. The share price is determined in advance, often in consultation with banks that manage the public offering. After the first trading day, the price is determined by supply and demand on the stock exchange.
Short example:
Suppose a company issues 1 million shares at an offering price of €10 per share. With this IPO, the company raises €10 million. You decide to buy 100 shares at €10 each and invest €1,000. On the first trading day, there is strong demand and the price rises to €12. Your 100 shares are then worth €1,200. If investors are less enthusiastic and the price falls to €8, your shares would be worth €800.
Disclaimer: Investing involves risks. Our analysts are not financial advisors. Always consult a professional advisor when making financial decisions. The information and tips provided on this website are based on the personal insights and experience of our analysts and are intended for educational purposes only.
