An initial public offering (IPO) is when a private company sells its shares to the public for the first time, usually to raise capital. Afterwards the shares trade on a stock exchange. In the United States the company must first file a registration statement with the Securities and Exchange Commission (SEC). It cannot sell the registered shares until SEC staff declare that statement effective. From then on it must file regular public reports.
The IPO market in 2026
Renaissance Capital's updated review of the third quarter of 2026 (1 October 2026) counted 30 US IPOs that raised a combined $32.8 billion. One deal accounts for most of that money: SK hynix's $26.5 billion US offering. SK hynix is a memory chip maker that was already listed in Korea. Without that deal, proceeds for the quarter were $6.2 billion. Eighteen IPOs raised $100 million or more. Renaissance said the pickup in autumn issuance stumbled on worries about AI spending, rising bond yields and renewed rate hikes.
Reuters reported in July 2026 that SK hynix priced its American depositary receipts at $149 each. The deal was a US listing of a company already public at home, not a first-ever share sale. Headline totals for IPOs can therefore depend on how a data provider counts such deals.
How an IPO works, step by step
1. Registration with the regulator
The Securities Act of 1933 has two main aims, according to the SEC's investor glossary. Companies must disclose material financial information, and fraud in the sale of securities is prohibited. As a general rule, every security offered in the US must be registered with the SEC or qualify for an exemption. A registration statement describes:
- the company's business and properties
- the security being offered
- management
- audited financial statements
Investors receive this information as a prospectus. The SEC requires the disclosure to be accurate but does not guarantee it, and it does not judge whether an offering is a good investment.
2. Confidential review of draft filings
Since 3 March 2025, the SEC's Division of Corporation Finance has given issuers more room to submit draft registration statements for nonpublic staff review. Any reporting company may now submit a draft for any type of offering, however long it has been public. An issuer can also leave underwriter names out of its first draft, though they must appear in later drafts and in public filings. The draft does not stay private for good: it must be filed publicly on EDGAR before the registration statement becomes effective.
3. Pricing, allocation and the first trade
Underwriters, usually investment banks, gauge investor demand. They then set the offer price with the company and allocate the shares, mostly to institutional investors. After the registration statement is declared effective and the deal is priced, the shares begin trading on the exchange. From that point the market sets the price, not the issuer.
4. Life as a public company
Once the registration statement is effective, the company becomes subject to the reporting requirements of the Securities Exchange Act, according to the SEC. Its obligations include periodic reports, annual meetings and proxy rules, duties for officers, directors and 10% shareholders, and the exchange's listing standards.
Rules that make going public easier for smaller companies
The JOBS Act created a category called the emerging growth company (EGC). According to the SEC, a company qualifies if its total annual gross revenue was under $1.235 billion in its most recently completed fiscal year. It also must not have sold common equity under a registration statement before 8 December 2011. An EGC may:
- use "test-the-waters" communications with qualified institutional buyers and institutional accredited investors
- provide two years of audited financial statements instead of three
- skip the auditor attestation of internal control over financial reporting required by Sarbanes-Oxley Section 404(b)
EGC status lasts up to five fiscal years after the IPO. It ends sooner if, for example, revenue reaches $1.235 billion or the company becomes a large accelerated filer.
Three ways to go public
How do a traditional IPO, a direct listing and a SPAC merger differ in what happens and which rule applies?
| undefined | What happens | New shares sold? | Rule and date | Source |
|---|---|---|---|---|
| Traditional IPO | Underwriters gauge demand, set the offer price with the company and place new shares, mostly with institutions; trading then begins | Yes, through an underwritten offering | Standard route: registration statement declared effective by the SEC before sale | |
| Direct listing | Existing shares are listed without an underwritten offering | Optional, through an NYSE primary direct floor listing | SEC approved the NYSE rule on 22 December 2020 | |
| SPAC merger (de-SPAC) | A listed shell company raises money first, then merges with a private company | The shell raises money before the merger | SEC final SPAC rules adopted 24 January 2024: disclosure of sponsor compensation, conflicts and dilution, and a minimum 20-calendar-day dissemination period |
This table compares only the routes and rules the article describes; it does not cover costs, timing or which route suits a given company, and it is not investment advice.
Lockups: when insiders can sell
A lockup agreement stops company insiders, such as founders, executives and early investors, from selling their shares for a set period after the IPO. The SEC's investor glossary says terms vary but most lockups last 180 days. Securities laws require the lockup terms to be disclosed in the prospectus. When a lockup expires, a large number of shares can become free to sell. That is why the expiry date is worth finding in the prospectus.
Lockups apply to insiders. People who buy shares in the IPO or on the exchange afterwards are not normally bound by them.
Alternatives to a traditional IPO
| Route | What happens | Status |
|---|---|---|
| Traditional IPO | Underwriters price and place new shares, then trading begins | Standard route |
| Direct listing | Existing shares are listed without an underwritten offering. An NYSE rule also lets the company sell new shares in a "primary direct floor listing" | SEC approved the NYSE rule on 22 December 2020 |
| SPAC merger (de-SPAC) | A listed shell company raises money first, then merges with a private company | The SEC adopted final SPAC rules on 24 January 2024. They require disclosure of sponsor compensation, conflicts and dilution, plus a minimum 20-calendar-day dissemination period for de-SPAC documents |
IPO vs token sale: what the buyer actually gets
In an IPO the buyer gets equity: an ownership stake in the company, set out in a registered prospectus. A token sale, often called an initial coin offering or ICO, sells a crypto asset. Whether that asset carries any claim on the project or its profits depends on how it is designed and sold.
Two SEC documents frame the question:
- July 2017. The SEC's report on The DAO found that tokens The DAO sold for Ether were securities, specifically investment contracts. The SEC said blockchain-based securities must be registered unless an exemption applies, "regardless whether the issuing entity is a traditional company or a decentralized autonomous organization." The SEC's investor bulletin issued the same day said tokens "may be securities" depending on the facts of each offering.
- 17 March 2026. The SEC issued an interpretation, joined by the CFTC, that sorts crypto assets into digital commodities, digital collectibles, digital tools, stablecoins and digital securities. It also explains how a non-security crypto asset can become subject to an investment contract and how that contract can end. SEC Chairman Paul S. Atkins said "investment contracts can come to an end."
In practice, buying a token rarely gives you the legal claim a share does, however similar the marketing sounds. The 2017 bulletin's advice still applies: ask what your money will fund and what rights the token gives you, and check that both are written down clearly.
What to read in an IPO prospectus
- Use of proceeds: what the company says it will do with the money.
- Risk factors: the company's own list of what could go wrong.
- Audited financials: revenue, losses and cash burn.
- Lockup terms: who is locked up and when the lockup ends.
- Share structure: different share classes and voting rights, and how much the founders keep.
