How an IPO Actually Works, From S-1 to First Trade
The registration statement, the roadshow, how the offer price is set, who actually gets allocation, and why the first-day pop is a cost to the company and usually a trap for you.
In this lesson you'll learn
The eight stages from confidential draft to lock-up expiry
Who actually captures a first-day pop
Why the opening print is structurally the worst price available to you
What to read in the S-1, and what to ignore entirely
Eight stages, and where you enter
An IPO is a sequence of filings and negotiations that runs for months. The useful thing about knowing the sequence is that it shows you exactly how late in it a retail investor is allowed to act.
1
Confidential draft
The company files a draft registration statement privately and goes back and forth with SEC staff. Nothing is public; nothing is investable.
2
Public S-1
The registration statement becomes public. This is the first moment you can read audited financials, the full share count and the risk factors the company's lawyers insisted on. Read the risk factors.
3
Price range set
An amended filing carries a proposed range and the number of shares offered. Multiply them and you have the company's own first guess at what it will raise.
4
Roadshow and book-building
Management markets the deal to institutions; the bankers build a book of orders. Demand here sets the final price. You are not in this room.
5
Pricing night
The final price is set, usually at or above the range if the book is strong. Allocations go out. The final 424B prospectus is filed — the document with the real numbers and the lock-up clause.
6
First tradeyou enter here
The stock opens, often well above the offer price. This is the first moment a retail investor can buy, and the worst-priced moment in the sequence so far.
7
Quiet period, then coverage
Underwriters' analysts begin publishing. Their firms just earned fees on the deal; weigh the ratings accordingly.
8
Lock-up expiry
Insider shares become sellable. Supply arrives. The date and the mechanics are in the prospectus from stage 5 — which is Lesson 6.
The pop, and who gets it
The gap between the offer price and the first close is the most discussed number in any IPO and the most widely misread. Here it is for the listings graded in Lesson 3:
Company
Offer
First close
Day-1 pop
Latest close
FIG
2025-07-31
$33.00
$115.50
+250.0%
$20.85
CRCL
2025-06-05
$31.00
$83.23
+168.5%
$89.00
RDDT
2024-03-21
$34.00
$50.44
+48.4%
$149.84
SPCX
2026-06-12
$135.00
$160.95
+19.2%
$148.68
CART
2023-09-19
$30.00
$33.70
+12.3%
$43.19
CRWV
2025-03-28
$40.00
$40.00
0.0%
$87.59
Compare the third column with the fifth. The pop is an event on one day; the latest close is what an investor who bought the open actually has. Those two columns frequently tell opposite stories.
A pop is the underwriters' book clearing at a higher price than they set, on a float that is usually a small fraction of the company. It is a supply fact. Reading it as "the market says this company is worth 2.5× what the bankers thought" is how people end up buying the high print of the year.
One listing followed all the way through
Averages hide the shape of the thing. Here is a single covered listing tracked from its offer price to now, 73 sessions later:
Offer price
$135.00
First close
$160.95
Peak close · 2026-06-16
$211.39
Latest · 2026-09-25
$148.68
SPCX — Space Exploration Technologies Corp.. Its lock-up expires 2026-12-09, which is the supply event Lesson 6 teaches you to price.
Reading the S-1 in twenty minutes
These filings run hundreds of pages. Five sections carry almost all the signal:
Risk factors
Written by lawyers to protect the company, which makes them the least promotional text in the document. Read for specifics — a named customer concentration, a pending contract renewal, a regulatory dependency — and skip the boilerplate.
Use of proceeds
"General corporate purposes" and "repay indebtedness" are very different sentences. The second tells you the offering exists partly to fix a balance sheet.
Selling stockholders
If existing holders are selling a large share of the offering, the transaction is substantially an exit rather than a capital raise. Both are legitimate; only one is being marketed to you as growth.
Share count and classes
Find the fully diluted count and any dual-class structure. Multiply the count by the price range to get the implied valuation — and compare it with the fund marks from Lesson 2. This is the one comparison that makes the earlier lessons pay off.
Underwriting — the lock-up paragraph
Near the back, the underwriting section states how long insiders are restricted and under what conditions. Our lock-up radar is built by reading that paragraph out of the final prospectus — 107 of them so far — rather than assuming the usual 180 days. Lesson 6 explains why that assumption is wrong often enough to matter.
The single most useful habit in this lesson: before deciding anything about a new listing, open the final 424B prospectus and read the risk factors and the underwriting section. It takes twenty minutes and it is the only information in the process that anyone signed their name to.
Quick Knowledge Check
3 questions · test what you've just learned
1
A stock is priced at $30 and closes its first day at $78. Who captured that $48?
2
What does a large first-day pop most reliably tell you about the offering?
3
Where in the process does the only fully reliable, verifiable information about the company appear?
✓ Key takeaways from Lesson 5
A first-day pop is captured by allocated institutional buyers. The company gets the offer price; retail gets the open.
A pop measures scarcity of float against assembled demand. It is not a verdict on the business.
The S-1 and the final prospectus are the only binding documents in the process. Everything else is marketing or commentary.
Waiting costs you nothing but the fear of missing out — and the supply event in Lesson 6 arrives on a date you can read in advance.
Every lock-up date we can read
The prospectus clause, quoted, for each covered listing — with the expiry date, the shares unlocking and how many sessions of volume it takes to absorb them.
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