IPO report, IPO share issuance (2025)

The acronym IPO is relatively unknown to many, even though it is strongly associated with stock investing and the stock market. One of the special features of this financial act, officially called the initial public offering, is that it allows you to buy into publicly traded companies before a company's shares are put on the market. This topic is also related to the SPAC, a corporate form that basically facilitates the attraction of venture capital. We will now delve into this topic, talk about the basic concepts, and go through the IPO process.

What is an IPO?

The acronym IPO stands for Initial Public Offering, which means first public offering of shares, but in many places it is translated as initial public offering. You can often find abbreviated forms of the term, such as public offering, the very first offering, etc. It basically means initial public offering, but I will use the longer version from now on. This best describes the meaning of IPO, and I will refer back to the words in it.

🆕📈Why does a company need an IPO?

Let's start from the beginning and turn back the wheel of time in the life of the company. It is very important to understand that companies operating in the capitalist model do not serve charitable purposes. The main goal is to make a profit, and all companies operate in this spirit. However, in order to produce high profits, high margins and, above all, well-priced products and services, a lot of resources are needed.

When a business that could initially be described as a garage company is formed around a good idea, they don't have the resources to implement their idea. Let's call our imaginary company Fantastic Co., because the founders think big. Let's look at how capital can be raised in a company:

• ✨the founders contribute their own capital, which becomes the company's share capital
• ✨they take out a loan from the bank, which must have some kind of collateral (the company's assets, a mortgage on the house, etc.)
• ✨they raise venture capital from wealthy private investors or venture capital funds

Consequences of raising capital

Apart from the first case, in the other two cases, raising capital certainly comes with serious requirements, either Fantastic Co. has to pay the interest, or the venture capitalists set goals and milestones to be met. However, they do not give the full amount upfront, but only in installments if the specified milestones are met. This is typically the initial phase of a startup, you can also invest in such companies, I have written a few articles about them (Startup articles).

The point is that Fantastic Co. needs a lot of money to build its prototype or create the conditions for its service. If it succeeds, it will have to start manufacturing the product, promoting the service, building relationships, hiring employees, and so on. All of this consumes a lot of money. Moreover, sooner or later there will come a point when investors will also want to get their capital back, of course, along with profits, which we call an exit.

⚠️Problems of non-listed companies

What’s the problem with the above reasoning? Let’s say Fantastic Co. increases its equity value from $20000 to $500000, a twenty-five-fold increase. Of course, this is small money in the US market, but for a young company it is already a significant increase in value. 50% of this goes to the two founders, and 50% to the venture capitalists. However, the venture capitalists do not know where to sell their stake, since this part is formally in a closed company. The founders cannot buy them out, since they were the ones who arranged the venture capital.

There are platforms for exiting such companies, where small investors pool capital, such as Crowdcube or SeedRS (crowdcube, SeedRS), where startups can be crowdfunded, to use a fancy word. In the case of SeedRS, there is a secondary market where these ownership shares can change hands. In this case, investors have to find someone they can convince that this business share is really worth something and is willing to take it from them, but in most cases the liquidity is so low that it is not possible to sell these shares.

📌Practical experience: In 2021, I built a portfolio of 21 startups and in June 2025, I sold 4, 3 went bankrupt, 1 is about to go bankrupt, 4 are doing very well, there is no meaningful information about the rest. However, I had 0! exit opportunities, so to put it mildly, I didn't make any money on this story. That's why IPOs are important for such companies, because they provide investors with an exit, i.e. they list their shares on the stock exchange, where they can finally realize their profits.

🪤Investors in a trap

The world of startups is a fairly unregulated area, as it is difficult to determine the fair value, contracts have to be concluded, the new owner has to be registered, the old one has to be deleted, it is difficult to realize a profit above the fair value, and so on. Moreover, the company cannot attract additional capital, which will be needed for expansion. What is the solution to this? IPO, or initial public offering. Listing on the stock exchange is not necessary, the majority of companies in the world operate as private companies. The two best examples of this among giant companies are the world's largest furniture manufacturer, IKEA, or the largest energy drink manufacturer, Red Bull.

There is another special case of IPOs where the focus is not on raising capital, but simply on the founders wanting to realize a profit and they also need an exit point to do so, and they launch their own shares. This is quite rare, but not without precedent.

💡Why is an IPO good for the company and investors?

To summarize the above line of thought, the company needs additional resources, and the investors want to achieve a higher profit on their stake, possibly wanting to exit the company. The idea is to take the previously private company to the stock exchange, where its shares will become freely tradable after the issue and the price will be determined by market price movements.

An IPO can have the following benefits for the company:

• growth opportunity through fundraising. This could mean:
  • conquering new markets
  • the multiplication of capacities
  • cheaper, more efficient production due to increasing capacity and volumes
  • a changing capital structure, as shareholders provide capital to the company in exchange for ownership rights
  • improving credit conditions and liquidity due to more transparent operations
  • development of new technologies from surplus capital
  • unlike a bank loan, you don't have to pay interest on shares
• transparency improves. The company must submit reports to the current stock exchange regulator, which is the SEC in the USA, which are public, and investors can also access the data.
• the company's reputation may increase. The value of the brands it owns, the introduction is a kind of free advertising, drawing attention to the company
• strengthens consumer confidence. The company will become a "known name"
• the circle of investors is expanding. The company also has access to resources that it has not had before.
• IPO can be an exit point for venture capitalists. They simply sell their shares

IPO Obligations and Disadvantages

It's worth mentioning the other half of the story, as an IPO comes with both obligations and disadvantages:

• a public data provision obligation comes into effect, which shows the company's capital structure and, due to the spotlight, any competitive advantage can be copied
• someone has to prepare the reports, quarterly reports, and all other documents related to data reporting obligations, which is an additional burden and cost, and they must also comply with stricter rules
• partial loss of control over the management of the company, owners can have a say in the operation of the company
• the process is lengthy and complicated, that's why SPACs were invented, I'll talk about that later
• IPOs are expensive, as in most cases they involve so-called underwriters who manage the issuance process

An IPO can bring the following benefits to current investors:

• they have access to the company's shares earlier than other investors because they do not buy the shares from the stock market
• profit from the likely rising share price
• strong regulatory environment, as IPO documents must be submitted to the stock exchange supervision of the given country
• the company's results will be public and fundamentally analyzable
• The company has an extraordinary obligation to provide information if it comes into possession of information related to significant changes affecting the future.
• the company's securities will be liquid and can be sold with the click of a button

From the moment a company starts the IPO process, the underwriters actually manage the process. Who can be the underwriters? Basically, anyone who can promote the process and recruit clients, prepare the rather lengthy prospectus, and introduce the paper to a stock exchange. This is why brokers and banks are usually asked to act as underwriters, who actually manage the entire process, which is why they are also called issue managers.

📌Practical experience: Unfortunately, from the above, in my experience, it follows that the underwriters have an interest in recruiting as many customers as possible, since they are a kind of agent, while the company has an interest in increasing its own initial subscription price. Therefore, more than the company's real value is usually paid during the IPO. In many cases, after the IPO, the price starts to fall in the short term. It is not by chance that the IPO is also called: It is Probably Overpriced.

🔍Procedure with due diligence

The underwriters must have the necessary expertise in preparing the IPO, as they bear the lion's share of the process. They must also agree with the company on the form in which they will launch their shares. For example, the bank will buy the company's share package intended for the market, guaranteed capital, or will only act as a reseller, where there is no guarantee that any capital will flow in. It is common practice for the underwriter to spread the risk and involve other underwriters in the process, transferring part of the shares to them, diversifying it.

The signatories are trying to give all kinds of presentations, prepare analyses, and use other sales techniques to attract customers and expand their customer base. The goal is to make the fact that the shares of the best company in the world can now be subscribed to before public trading begins become widely known.

📌Practical experience: I don't want to disappoint anyone, but I've found that due diligence is a big bullshit when it comes to startups. Platforms do almost nothing to protect investors, what is legal is fine. But for example, they don't check valuation at all, nor the attitude of management, and I could go on and on. Don't trust the "experts" to do this work for you.

Conflicts between stakeholders during the IPO

An important point is that the IPO will be successful for the company if the shares are sold at the highest possible price during the initial offering, as this way the company can raise more capital. At least that sounds logical, doesn't it? But in reality, this is not really what happens. The underwriters usually start the subscription at a price lower than the share value they have set. The story has three characters: the company entering the stock exchange, which sells a certain percentage of its ownership, the underwriter, who announces the subscription, and the underwriter's clients, the investors, typically institutional investors, who subscribe to the paper.

The underwriter managing the issue must be most responsive to the investor. On the one hand, because while the company only goes public once, investors want to subscribe to multiple IPOs, so they will be repeat customers. How can you achieve high returns quickly? If you underprice the paper, then on the first trading day, on the one hand, you can make a profit compared to the real price, provided that the market also considers the price set by the underwriter to be the real price, and on the other hand, they are more likely to start buying the paper in significant volumes, which often drives up the price. Interestingly, although the issuing company pays the underwriter, it still benefits the investor, creating a kind of conflict of interest between the parties.

IPO subscription

As a small investor, who is likely reading these lines, how can you pre-subscribe to an IPO? The short answer is: it is not very simple. Pre-subscription requires a lot of capital and connections, so the opportunity is usually available to institutional investors. I am not saying that it is impossible to arrange such a thing from home, but it is not easy, and the capital requirement can be significant. In this case, the paper has not yet been introduced to the stock exchange, it is not available to the general public, and I would be surprised if Goldman Sachs approached John Doe to ask if he would not subscribe to some shares.

Fortunately, institutional investors, non-institutional investors, e.g. company employees, and retail investors are treated separately, with the latter receiving a portion of the issued shares. The problem is that when it comes to an IPO of a popular company, there is usually oversubscription, and some investors will not have access to the subscription.

Distribution of shares during the IPO

To decide who gets the shares, different procedural processes are used during the subscription:

• Fixed Price Offering: fixed price, it is relatively clear what it means, shares can be subscribed at a given price.
• Book Building Offering: unlike the previous one, the underwriters determine a subscription price range. The meaning of this is that if there is oversubscription, then offers located higher in the price range will be served first, but only as long as the stock lasts. For example, if the range is 20-30 USD, and we have given our own price of 21 USD, then we may not get any shares, but they will be sold at a higher price.
• Dutch Auction: it is worth watching the video in the link, which explains the essence well. It is practically a reverse auction, they start with a high price and then lower it. In this system, the first bid usually wins, that is, the bidder who is willing to pay the highest price for the share. The available quantity is filled from top to bottom, which is sold out somewhere, but usually at a relatively high price.

For those who think that the misery of the poor investor who subscribed to the IPO is definitely over now, I have some bad news for them. If the subscription is successful, but there is oversubscription, they also pay attention to ensuring that the widest possible range of investors gets shares. In other words, if there were 1000 shares available for subscription, and we wanted 100, but there were 500 subscribers, then everyone will get 2 shares. And if there is extreme oversubscription, they simply draw lots to select the winners.

Stock exchange access

There is another problem, direct access to the stock exchanges. IPO papers can only be subscribed to by brokers who have direct access to the stock exchange. That is, Forex and CFD brokers do not have such access, these are OTC instruments, but e.g. Interactive Brokers does. This of course poses another obstacle for ordinary people.

Another option is for small investors to buy ETFs that include listed shares. There are funds that specialize in direct IPO share issuance, one of which, not surprisingly, runs under the IPO ticker. The problem here, however, is that you can't hold the shares even if that were your intention; instead, the fund's strategy is to eventually divest itself of the shares.

IPO trading

The second option is to trade IPOs, that is, to buy and hold the paper from the first day of public trading or to short it, this is available to everyone, but here the instrument is no longer available at a discount price, as during the subscription. On the other hand, if the market values ​​the paper differently than the underwriters did, you will also see this in the price movement. However, there are two advantages to this, on the one hand, the costs are almost certainly lower at discount brokers than during the subscription. On the other hand, much less capital is required for the purchase, you can buy even 1 share, although this is obviously not the most efficient way to size your position.

There is another advantage: if for some reason the launch of the IPO is delayed, it will not affect small investors, their money will not be stuck, meaning they can count on the usual market liquidity after the launch.

Investment strategies for IPOs: short and long term

The first question is how you approach such stocks. It could be short-term, with speculative purposes, for example, appealing to the price increase in the first or first few days, or perhaps playing for a fall. However, it is good to know that the underwriter's assessment in itself means nothing, the stock has no history on the stock exchange, meaning that Mr. Market has not yet decided what the real value is.

However, there is a pretty good chance that it will turn out to be profitable. One of the most comprehensive studies was conducted by Jay R. Ritter in 2020 (IPO statistics). The professor summarized the IPO issues between 1980 and 2020, which amounts to a total of 8775. Their average first-day return is 18.4% based on four decades of data. The market focuses so much on the stock and the hype is so great that it drives up the price, this is called attention-driven buying pressure. The other is that as the mania intensifies, the available return and the number of issues seem to increase. I would highlight three years, in 2000 the average first-day return was 56.3% (2001, dotcom boom), in 2007 it was 14% (2008, real estate crisis), in 2020 it was 41.6% (COVID).

🏆Have I found the stock market Holy Grail?

There is no need to draw any far-reaching conclusions from the above, as these are averages, there have been plenty of IPOs with negative returns. For example, Facebook (META) fell quite a bit in 2012 from 45 USD to skyrocket after a major pause. A significant drop may occur precisely because, as I mentioned above, venture capitalists want to exit the company and realize their profits, which will naturally involve a sale.

A counterexample is GoPro (GPRO), which fell sharply after the initial frenzy and has not been able to recover to anywhere near its original peak since. The rise could be due to, for example, the high media attention that is focused on a very trendy product, which is why many people want to buy the stock after the release. It could also be that larger IPO ETFs or funds are buying, which can move a significant amount of money, which can drive the price up. Since there is only limited data available on these companies at the time of the IPO, it is easy to be smart in hindsight. There is no price chart at the time of the first public offering, and the only data available is what the company says about itself, so just be careful with things.

📌Practical experience: In practice, an IPO is a speculation, fundamentally it is very difficult to analyze the company, because it has no stock market history, so there is not much data. However, if you were involved as a startup, then you can know the company from the inside, for example, you may have had the opportunity to do this with Revolut in the last few years. However, personally, I think that an IPO is more of a risk than an opportunity if you have not dealt with the company before.

IPO ETFs and Funds

In addition to traditional stock ownership, there are of course other financial instruments that allow you to gain exposure to IPOs. IPO ETFs are great for diversification, as you never know which IPO will be successful in the short or long term.

I did a quick search on ETF.com (ETF.com), the search engine returns 8 ETFs. In the case of IPO ETFs, in addition to the usual ETF criteria, you also need to consider some special things. It doesn't matter what criteria the fund used to select the IPOs, e.g. market capitalization or sector, as this can lead to completely different returns than those based on Professor Jay R. Ritter's study. Returns alone don't tell you much, it's worth looking at the downturns as well, as timing the stock market is practically impossible.

SPAC instead of IPO? The thin path to escape

The IPO topic includes the abbreviation SPAC, which stands for Special Purpose Acquisition Company. Translated, it could be translated as Special Purpose Acquisition Company, but it is practically an empty company. SPACs are also often called blank companies. From this, you can guess that such companies actually have no production activity at first, that is, they do nothing. But then what is in them? It is practically venture capital, so they are also called publicly traded venture capital companies.

SPACs are companies that are already listed on the stock exchange and their goal is to acquire some promising, but not yet listed company in the near future, so they do not have to carry out an IPO. Of course, this is not necessary, they can also merge with another listed company. Usually, they set a 2-year deadline for the acquisition. Since SPAC companies are also regulated by the US Securities and Exchange Commission (SEC), they are also publicly traded companies.

Advantages of SPAC over IPO

Why is it good for investors to buy shares of a SPAC company? I think you can easily guess, but I'll list a few:

• they can invest in private companies, as SPAC companies mostly buy such companies
• small investors can also indirectly access venture capital investments
• There is no IPO subscription, so it is impossible for someone to not get shares
• Usually, the share price of SPAC companies is $10, which is a kind of tradition, so you can get in with low capital.

Disadvantages of SPACs vs. IPOs

It is important to understand that SPACs are very attractive because of the above advantages, but this is also where the enormous risk lies. Since these are empty companies when buying shares, it is often not possible to know who the acquisition target is, nor whether the acquisition will ever be successful. To summarize the disadvantages:

• the acquisition may never be completed
• there are no famous signatories, companies with a great reputation typically do not undertake risky deals that damage their reputation
• At first, it is not known what the specific target will be, so it is a rather speculative form of investment
• there are no figures, it is not yet possible to apply the tools of fundamental analysis to the company, as it has no activities
• There is no guarantee that the acquired company will be able to grow and generate profits, as these companies are often in the early stages of their operations.
• if the acquisition fails, investors get their money back, but they also lose the 2-year opportunity cost of the money

Because of the above, SPAC companies typically look for companies with a promising story, such as space travel, renewable energy, electric cars, plasma reactors, etc., since media attention and emotions often drive up the price. Of course, this does not mean that a SPAC cannot be successful, but it is worth being aware that this is more of a gambling category than an investment. Nevertheless, there are successful SPAC acquisitions, you can find out about them on the SPAC Analytics pages (SPAC Analytics). Some of the better-known names that have entered the market in SPAC form are: Playboy, ChargePoint, and Lucid Motors, which promises to be the largest in terms of amount, with over 2 billion USD.

I also included a picture as of June 2025, i.e. the changes over the past 4 years, where I marked two areas. One is that you can see that after the end of 2021, when money printing stopped in the market, venture capital disappeared and the number of SPACs fell, but also the number of IPOs. The other is the number of SPAC companies that went bankrupt and were delisted. This is a very risky, speculative form, and I don't think it's for small investors.

📌Practical experience: Although I have never participated in an IPO or SPAC, I have invested in startups more than 20 times. These investment forms typically attract venture capital. They are very speculative, difficult-to-estimate “investments”, and capital flows here when it cannot find a place elsewhere. This happened in 2021, when everyone found the stock market very expensive, at which time venture capitalists turned to the IPO/SPAC/startup world.

In my experience, there is no point in investing here. I have an otherwise very prosperous startup that was able to raise capital in 2022 at a valuation three times higher than in 2024, while its revenue is four times higher and it has since become profitable. However, in the dead times, when capital flees, very significant disparities can develop between the real and the paid price. It's a real fish in the rough, but these are exactly what you need to look for in this market. I DO NOT RECOMMEND IT AT ALL FOR BEGINNERS, NOR FOR THOSE WHO ARE NOT EXTREME RISK TAKERS.

Summary

As you can read above, IPO is a rather complicated topic, and I didn't even elaborate on the SPAC part. The point is that you should have a general understanding of the Initial Public Offer, or the process of the first public share issue. It's not that easy to participate in it as a private individual. You definitely need a brokerage firm for larger IPOs, and you have to participate in the bidding, which is quite tricky in itself. Of course, you can also buy – or short – their shares on the stock exchange on the first trading day. If you want to participate in an earlier stage of the process, you can buy the shares of SPAC companies funded by venture capital. However, you should be aware that these are quite speculative forms of investment that carry a high risk.

Whichever form you choose, it is very important to be able to determine the approximate value of a company so that you are aware of how much you are actually paying for it. Fundamental analysis can provide guidance for this, one of the most important elements of which is the interpretation of the Balance Sheet and Income Statement lines, which you can find information about in the following article: Interpretation of balance sheet and income statement lines

Frequently Asked Questions (FAQ)

Which broker should I choose to buy shares?

There are several aspects to consider when choosing a broker - we will write a complete article about this - but I would like to highlight a few that are worth considering:

• size, reliability: The bigger a broker, the safer it is. Those with a banking background – Erste, K&H, Charles Schwab, etc. – are even better, and well-known brokers are typically more reliable.
• expenditures: Brokers operate with various costs, such as the account management fee, the portfolio fee - which is the worst cost -, the purchase/sale fee and the currency exchange cost (if USD is not deposited in the brokerage account)
• Availability of instruments: It doesn't matter which broker has which market available, or whether they add the given instrument upon request and how quickly.
• account type: cash or margin account, the latter can only be used for options. For Hungarian tax residents, having a TBSZ account is important, but citizens of other countries also have special options – such as the American 401K retirement savings account – which are either supported by the broker or not.
• surface: is one of the most underrated aspects, and it can be a real pain. Anyone who had an account with Random Capital, a now-defunct Hungarian broker, knows what it's like to work on a platform left over from the 90s. Erste's system is lousy slow, Interactive Brokers requires a flight test, and LightYear believes in simple but modern solutions.

Based on the above, I recommend the Interactive Brokers account because:

• the world's largest broker with a strong background
• a few million instruments are available on it, and shares listed on multiple markets – e.g. both the original and the ADR – of a single share are often available
• Interactive Brokers a discount broker, they have the lowest prices on the market
• you can link your Wise account to them, from which you can quickly transfer money
• Morningstar's analyses are available for free under the fundamental explorer (good for analysis)
• EVA framework data is available under fundamental explorer (useful for analysis)
• they have both cash and margin accounts, Hungarian citizens can open a TBSZ
• you can use three types of interfaces: there is a web and PC client and a phone application

What data sources did you use to analyze stocks?

For quantitative analysis, we primarily use various stock screening sites, and for qualitative analysis, we use company reports and other analyses, such as the Substack channel, podcasts - Business Breakdowns - and similar sources.

What matters: value or quality?

The answer is both, but quality is more important. It is much better to buy a very high-quality company at a fair price than to buy shares of a cheap but poor-quality company.

What is the best time frame to buy shares?

The minimum is 5 years, but you should consider the time horizon from 10 years to infinity. Our approach is typical "buy and hold", the emphasis is on selection, then we try to hold the shares for as long as possible, which requires conviction. We rarely sell, mainly if we feel that the thesis we set up has been broken or if we have made a mistake.

Which is better: individual stocks or ETFs?

There is no truth to this question. It is very easy to track the market with an S&P 500 ETF, and it is worth doing for beginners, because it can be done with a little knowledge and practice. Analyzing individual stocks requires 30-50 hours per company, so we do not recommend it to those who do not like it.

Do you hold the shares in a TBSZ account?

Yes. As a Hungarian citizen, the tax advantage over a traditional cash-based account is so great that it is worth opening a new TBSZ account every year, and then the withdrawal of money is also solved (but if you do not want to withdraw anything from it, you can extend these)

Why don't you specify a specific purchase price for the shares in your analyses?

We do not set purchase prices for several reasons: firstly, because it is impossible to calculate the exact value of a company. Secondly, because we cannot give investment advice, these analyses are only made to support the decisions of others. That is why we use fair value estimates from other services, as well as a certain margin of safety. Ultimately, your conviction will decide how much a company is worth to you.

Which stock price will rise or fall?

Nobody knows, because there is no magic bullet that can tell. It can be based on mathematical probabilities. The prices of high-quality companies that have growing sales, are able to reinvest the cash generated into the business, and have high intrinsic value creation tend to rise in the long term. But in the short term – a few years – the market and the price can move anywhere.

Legal and liability statement (aka. disclaimer): My articles contain personal opinions and are written solely for my own entertainment and that of my readers. iOChartsThe articles published on do NOT in any way exhaust the topic of investment advice. I have never wanted, do not want and am unlikely to provide such in the future. What is described here is for informational purposes only and should NOT be construed as an offer. The expression of opinion is NOT in any way considered a guarantee to sell or buy financial instruments. You are SOLELY responsible for the decisions you make, and no one else, including me, assumes the risk.