My coworker Brian wouldn’t shut up about Circle stock back in June. He’d bought shares the day they went public and watched his investment quadruple in a few months. I asked him what is an IPO in the stock market, and he looked at me like I’d just asked what the internet was.
Turns out lots of people don’t actually know. They hear about these companies “going public” and making people rich, but the whole process seems wrapped in mystery. Let me break it down.
The Basics Without the Finance Speak
An IPO, or Initial Public Offering, is when a company sells its stock to regular investors for the first time. Before that, the company’s ownership was limited to founders, employees, and maybe some venture capital firms. After the IPO, you or I can buy shares just like we’d buy Apple or Tesla stock.
Companies do this mainly for one reason: money. Lots of it. When you’re trying to grow fast, you need cash. Sure, you could take out loans, but that means paying interest and giving banks control over your business. Selling shares means you get the money without owing anyone interest, though you do give up some ownership.
Back in March 2025, CoreWeave raised $1.5 billion through its IPO. That’s serious money for building data centers and expanding their AI cloud business. They couldn’t have gotten that kind of cash any other way without drowning in debt.
What is an IPO in the Stock Market and How it Works: The Real Story
Here’s how the whole thing actually plays out. A company decides it’s ready to go public. Maybe they’ve been thinking about it for years, or market conditions finally look right. This year’s been wild, as there have been 281 IPOs that hit the US market by mid-October, which is 65% more than the same time last year.
First thing they do? Hire investment banks. These banks are called “underwriters”, and they basically manage the whole circus. The company picks a lead underwriter, such as Goldman Sachs or Morgan Stanley, and sometimes a few others, to spread the risk around.
The underwriters help figure out how much the company’s actually worth. This isn’t some random guess. They look at revenue, growth potential, what similar companies are valued at, and how much investor demand exists. Getting this wrong tanks the whole thing.
My friend Sarah works at an investment bank, and she says the valuation meetings can get heated. Everyone’s got different ideas about what the company should be worth, and there are millions of dollars riding on getting it right.
Then comes the paperwork. Mountains of it. The company files something called an S-1 with the SEC (Securities and Exchange Commission). This document spills everything, such as financial statements, risk factors, who owns what, legal problems, and the works. It’s meant to give potential investors all the info they need to decide if they want in.
The SEC reviews this filing. They’re not saying whether the company’s a good investment or not. They’re just checking that the company disclosed everything properly. If something’s missing or looks fishy, the SEC sends it back for revisions. This back-and-forth can take weeks.
The Roadshow: Where Companies Sell Their Dream
Once the SEC approves the filing, things get interesting. The company’s executives hit the road—literally. They travel to New York, Boston, San Francisco, and sometimes London or Hong Kong, doing presentations for institutional investors. The big money players include pension funds, mutual funds, and hedge funds.
These roadshow meetings are sales pitches. The CEO and CFO stand up there explaining why their company’s going to crush it, why their business model works, and why now’s the perfect time to invest. They’re basically asking these investors to commit millions before the stock even starts trading.
Circle’s roadshow must’ve been spectacular because their stock jumped from $31 to $183 after going public. That’s the kind of performance that makes roadshows legendary.
During this time, the underwriters “build the book”. They’re collecting orders from investors who want shares. Based on how much demand there is, they set the final price. If everyone’s chomping at the bit, the price goes up. If interest is lukewarm, they might lower it.
The Big Day (And What Comes After)
IPO day is chaos. Trading usually starts around 10 AM Eastern, though there’s a pre-opening session where they match buy and sell orders. The price can swing wildly in the first few hours as everyone tries to figure out what the stock’s actually worth.
Some IPOs moon. Circle’s shares surged nearly 170% on their first day back in June. Others crash hard. Venture Global is still trading below its IPO price, and people who bought on day one are underwater.
The underwriters have a job even after trading starts. They’re supposed to “stabilize” the stock price, which basically means propping it up if it starts falling too much. They can buy shares to create demand, but they can’t do this forever. Eventually, the market decides what the stock is worth.
Here’s something most people don’t realize: regular investors like us usually can’t buy shares at the IPO price. That stock gets divvied up among institutional investors and the bank’s best clients. By the time we can buy, the price has already jumped (or dropped) from the initial offering price.
Brian actually got his Circle shares through his broker because he’s got a big account with them. They threw him a bone with a small allocation. Most of us? We’re buying on the open market after all the action’s already happened.
This Year’s Been Absolutely Nuts
2025 started slowly for IPOs, but things picked up fast. Chime, eToro, and Circle all went public in the first half of the year. The AI boom’s driving a lot of this. Companies building AI infrastructure are getting crazy valuations.
Figma raised over $1.2 billion and hit a $56 billion market cap, making it the largest IPO of the year. Design software doesn’t sound sexy, but tech teams are obsessed with their platform. That translated into investor demand.
Not everything’s been smooth sailing, though. CoreWeave had to cut its IPO price from a target of $55 down to $40 after Microsoft backed out of some commitments. The market was spooked about AI spending and whether CoreWeave’s business model actually works long-term.
Companies like Stripe and Databricks keep teasing IPOs but haven’t pulled the trigger yet. Databricks is valued at $62 billion, and its CEO keeps saying they need “market stability and clear direction” before going public.
Translation: They’re waiting for the perfect moment that might never come.
Why Companies Put This Off
Going public isn’t all sunshine and champagne. Yeah, you get the money. But you also get a ton of new headaches. Public companies have to report earnings every quarter. Miss your numbers by even a little bit, and your stock gets hammered. Shareholders get a say in major decisions. Financial info becomes public—competitors can see exactly how you’re doing.
Plus, it’s expensive. The whole process costs millions in banking fees, legal bills, accounting audits, and compliance costs. And those costs don’t stop after the IPO. Being public means constant SEC filings, investor relations staff, and quarterly earnings calls. Small companies sometimes go public, then realize they can’t afford to stay public.
My sister’s company thought about an IPO last year but decided against it. The CEO didn’t want to deal with quarterly earnings pressure. She wanted to build the business long-term without Wall Street analysts breathing down her neck every three months.
Should You Buy IPO Stocks?
Honest answer? It’s a crapshoot. For every IPO that takes off like Circle or Figma, there are dozens that tank or just tread water. Reddit went public in March 2024 at $34, jumped on day one, and eventually reported its first quarterly profit with 68% revenue growth. That worked out. But plenty don’t.
The data shows IPO stocks are super volatile. They can double or get cut in half within weeks. If you’re buying an IPO, you’d better have a strong stomach and money you can afford to lose.
Brian’s Circle trade worked out beautifully, but he also lost money on two other IPOs this year that nobody talks about. Survivorship bias is real. You only hear about the winners.
Here’s my take: if you really believe in a company and plan to hold for years, buying after the IPO dust settles makes more sense. Let the stock find its level, see how the first couple of earnings reports go, then make your move. The overnight millionaire IPO stories are fun, but they’re also rare as hell.
The Bottom Line on IPOs
What is an IPO in the stock market? It’s a company’s debut on Wall Street. A moment when private ownership meets public markets. Sometimes it’s spectacular. Sometimes it’s a disaster. Always, it’s a gamble.
The process takes months, costs a fortune, and requires an army of bankers, lawyers, and accountants. Companies put themselves through this because they need capital to grow, and public markets offer more money than any other source.
For us regular investors, IPOs offer a shot at getting in early on companies that might become the next big thing. They also offer a chance to lose money fast if the company doesn’t deliver. That’s why most financial advisors tell you to be careful with IPOs and never bet more than you can afford to lose.
Brian’s still riding high on his Circle gains. Good for him. Me? I’m watching a few upcoming IPOs but staying cautious. The market’s been too crazy this year to get greedy. Sometimes the best trade is the one you don’t make.
Disclaimer: This article is for informational purposes only and not financial or investment advice. Always do your own research or consult a licensed financial advisor before investing in IPOs or any stocks.