Initial Public Offering

An initial public offering (IPO) is the first sale of a company's shares to public investors on a stock exchange. The company works with investment banks to prepare a regulatory filing that discloses financials, risks, and business details, sets a price range, markets the offering to institutions, and then begins trading. For a startup, an IPO is one of the two main exit routes alongside acquisition. It raises a large amount of capital at once, gives employees and early investors a way to sell shares, and establishes a public valuation. The costs are ongoing: quarterly reporting, audited disclosures, regulatory compliance, and pressure from shareholders who react to short-term results. Some companies stay private longer by raising large late-stage rounds or offering employees liquidity through secondary sales, a pattern common among heavily funded AI firms. A direct listing or a merger with a special purpose acquisition company are alternative routes to public markets. The common misreading is treating an IPO as a finish line. It is a financing and liquidity event rather than proof of a durable business, and companies that list before their unit economics stabilize often trade well below their offering price afterward.