According to the Corporate Finance Institute, there are five steps in the IPO process.

  1. Due diligence and regulatory filings. It occurs three months before the IPO.
  2. Pricing. The pricing depends on the value of the company.
  3. Stabilization. From the date the company is listed on the Stock Exchange, the stock price will be determined by market forces and demand for the stock.
  4. Transition to market competition. It starts 25 days after the IPO, once the quiet period ends. The underwriters provide estimates about the company’s earnings. That assists investors as they transition to relying on public information about the company.

Investors are generally free to sell their shares from the IPO onwards. Founders and Board members are generally held in a lock down for 2 years.

In summary, a private corporation becomes a public company through an IPO. It sells shares of ownership or stocks to the public market. Going public allows the company to gain any of four advantages;

  1. An expansion through a huge capital boost.
  2. Capacity to acquire or merge with another company.
  3. Facility to competitively attract talented management.
  4. Enormous increase of investment value for the original private investors.