What is an IPO?

An IPO (Initial Public Offering) is an initial public offering of a company in which, among other things, the number of shares, the issue value and other conditions are reported to the SEC. The purpose of such an IPO is simply to generate money. Another expression or term for this procedure is “going public”. The opposite is “going private”, where a company decides to get delisted from a stock exchange. This could be due to a takeover from an investing company or a management buyout.

IPOs do not take place on a regular basis. IPOs can also be postponed in difficult circumstances such as economic problems or political unrest. During such a period, traditionally few to no IPOs take place.

IPO Lockup Period

The lockup period also serves a useful purpose. Up to 180 days after the start of trading, subscribers or management who may have very large blocks of shares may not (yet) sell them. This is intended to achieve a healthy balance between supply and demand during the first few weeks of trading in a new share. As with the end of the quiet period, there are often sharp price fluctuations afterwards. These two dates are therefore very important for interested investors.

IPO Quiet Period

During this so-called quiet period, the company’s management is not permitted to carry out marketing activities that have an impact on the share price.

This period lasts for 40 days after the start of trading in the respective share. This is intended to prevent the share price from shooting up due to excessive advertising of a share without the general public really having access to the business documents. As the management often also owns a block of shares, the aim is to prevent unjustified profits being made within a very short period of time (see also lock-up period).