Most investors who think they’ve bought into an IPO actually missed the IPO entirely. They bought shares on the first public trading day, paying whatever the market demanded, after institutional investors had already locked in their allocations weeks earlier. The real IPO, the one that determines the offering price and who gets shares at that price, happens in a process most retail investors never see.
That process is about to play out at the largest scale in financial history. On May 20, 2026, SpaceX filed its S-1 prospectus with the Securities and Exchange Commission, seeking to raise $75 billion at a valuation between $1.75 trillion and $2 trillion. The previous record was Saudi Aramco’s $25.6 billion offering in 2019. SpaceX’s target is nearly three times that.
Here is what happens between a company’s filing and its first trade, what the numbers look like, and what history says about betting on newly public companies.
In This Article
- What “going public” actually means and what a company gives up
- The S-1 filing: a company’s first public confession
- Underwriters, roadshows, and the pricing game
- What happens on the first trading day
- The lock-up cliff that follows every IPO
- How IPOs have actually performed, by the numbers
What “going public” actually means and what a company gives up
An IPO, or initial public offering, is the first time a company sells shares of its stock to the general public. Before an IPO, a company is privately held: its shares are owned by founders, employees, and venture capital or private equity investors. After an IPO, anyone with a brokerage account can buy and sell those shares on a stock exchange.
The mechanics are straightforward. The company creates new shares (or existing shareholders sell some of theirs), prices those shares, and sells them through a network of investment banks. The money raised goes to the company for newly issued shares or to the selling shareholders for existing ones.
What gets lost in the headline coverage is why companies go public in the first place. Capital is the obvious answer. SpaceX, for example, plans to use its IPO proceeds partly to fund Starlink satellite expansion and its AI subsidiary xAI, which burned through $6 billion in operating losses in 2025. But capital is only half the story.
Going public also creates liquidity for early investors and employees who have spent years holding shares they could not easily sell. It creates a public currency: the company’s stock becomes something it can use to acquire other businesses or attract talent with stock compensation. And it subjects the company to a level of financial transparency that private companies can simply avoid. SpaceX, famously secretive for two decades, published detailed revenue figures for the first time in its S-1 filing.
The tradeoff is real. Public companies face quarterly earnings scrutiny, activist shareholders, short sellers, and the SEC. Many founders delay going public for as long as possible. SpaceX waited 24 years.
The S-1 filing: a company’s first public confession
Every U.S. IPO begins with a document filed with the SEC called the S-1 registration statement. It is a complete accounting of the company’s finances, risks, executive compensation, ownership structure, and business strategy, written in a format the SEC prescribes and the public can access for free on the SEC’s EDGAR database.
The S-1 contains sections that every prospective investor should read (most don’t).
The risk factors. Companies are required to list everything that could go wrong. SpaceX’s S-1 runs to hundreds of pages of risks: rocket launch failures, regulatory challenges, the fact that its CEO controls a majority of voting shares. These disclosures are not hypothetical exercises. They are legal shields that protect the company from lawsuits if those things actually happen.
The financials. For many companies, the S-1 contains the first audited financial statements the public has ever seen. SpaceX’s filing revealed that Starlink generated $11.4 billion in revenue in 2025 with 10.3 million subscribers across 164 countries, while the overall conglomerate posted a net loss of $4.94 billion.
The use of proceeds. Where the money goes. This section tells you whether the company is raising capital to grow, paying off debt, or cashing out early shareholders.
After filing, the SEC reviews the document and may request revisions. This review typically takes several weeks before the offering can proceed.
Underwriters, roadshows, and the pricing game
No company runs its own IPO. Instead, the company hires investment banks called underwriters to manage the entire process. The lead underwriter, also called the bookrunner, coordinates the offering. For SpaceX, Goldman Sachs holds that role, with Morgan Stanley, Bank of America, Citigroup, and JPMorgan Chase filling out the syndicate.
Underwriters do three things.
First, they market the deal. In the weeks before the IPO, company executives and the underwriting team embark on a “roadshow”: a series of presentations to institutional investors (pension funds, mutual funds, hedge funds) designed to generate interest and gauge demand. SpaceX’s roadshow began on June 5, 2026. These are private meetings, closed to individual investors.
Second, they build the order book. As institutional investors express interest, the underwriters collect “indications of interest” specifying how many shares each investor wants and at what price. This process, called book-building, determines the final offering price.
Third, they set the price. The night before the IPO, the company and its underwriters agree on the final offering price based on the order book. This is a negotiation. Companies want the highest possible price. Underwriters want a price low enough that shares will trade up on the first day (a “first-day pop”), because their best clients, the institutional investors who got allocated shares, expect an immediate gain.
This tension is one of the most studied phenomena in finance. Academic research from Jay Ritter at the University of Florida shows that U.S. IPOs are systematically underpriced: between 1980 and 2020, the average first-day return was approximately 18.8%. That means companies routinely leave billions of dollars on the table, money that flows to the institutional investors who received allocations rather than to the company itself.
What happens on the first trading day
On the morning of the IPO, the designated stock exchange (Nasdaq, in SpaceX’s case, under the ticker SPCX) opens trading. But there is a gap between the offering price and the opening price. Market makers collect buy and sell orders in the minutes before trading begins and set an opening price that balances supply and demand.
If demand is high, the opening price can land far above the offering price. When Alibaba went public in September 2014, shares were offered at $68 and opened at $92.70, a 36% jump. If demand disappoints, the opening price can fall below. Facebook’s May 2012 IPO priced at $38, and Nasdaq technical glitches caused trading chaos that contributed to a 16% decline in the stock’s first week.
Individual investors buying shares on the first trading day are almost always paying the opening price or higher, not the offering price. They are, in effect, buying from the institutional investors and early insiders who got allocations at the lower price.
This is the gap that most people miss when they talk about “investing in an IPO.” The offering price is one number; the price you actually pay in your brokerage account is quite another.
The lock-up cliff that follows every IPO
After an IPO, company insiders (founders, executives, early investors, employees with stock options) are typically prohibited from selling their shares for 90 to 180 days. This restriction, called a lock-up period, exists to prevent a flood of insider selling from crashing the stock price immediately after the offering.
When the lock-up expires, the effect can be dramatic. Millions or even billions of additional shares suddenly become eligible for sale. If insiders rush to sell, the increased supply can push the stock price down sharply. Research shows that stocks experience an average decline of about 1 to 3% around lock-up expiration, though the range varies widely depending on how many insider shares become available and how badly insiders want liquidity.
For an IPO the size of SpaceX’s, with insider holdings potentially worth hundreds of billions, the lock-up expiration date will be one of the most closely watched dates on Wall Street’s calendar.
How IPOs have actually performed, by the numbers
The first-day pop gets the headlines. The longer-term record is more sobering.
Jay Ritter, who has tracked every U.S. IPO since 1980, found that over three to five years, IPOs underperform comparable companies that were already publicly traded. The average IPO returns less than the broader market over a three-year holding period. This is partly a behavioral finance problem: investors get caught up in the hype of a new listing and pay prices that bake in years of optimistic growth assumptions.
Some individual IPOs produce spectacular returns. Amazon went public in 1997 at $18 per share (split-adjusted, that works out to roughly $0.075 per share in today’s terms). Google priced at $85 in 2004 and trades above $200 today. But for every Amazon, there is a Pets.com, which raised $82 million in its IPO, watched shares surge briefly, and then saw the stock collapse from $14 to $0.19 before the company shut down entirely.
The 10 largest IPOs of 2025 averaged a +37% first-day pop but only an +18% return through Q1 2026, according to Renaissance Capital. That first-day gain went mostly to institutional investors who received allocations at the offering price. Retail investors who bought at the opening price captured far less of the upside.
For individual investors, the uncomfortable reality is structural. The IPO market is designed to reward institutional buyers. Underwriters allocate shares to their best clients. Retail investors get access to whatever is left (usually nothing for the hottest deals) or they buy shares on the secondary market at a markup. One alternative is to wait: buy shares weeks or months after the IPO, once the initial volatility has settled and the company has reported a quarter or two of public financial results. Another is to invest in diversified funds that hold newly public companies alongside hundreds of others, spreading the risk of any single IPO flop.
SpaceX’s upcoming listing will test whether the record books can handle a $75 billion offering. But the underlying mechanics will be the same ones that governed Saudi Aramco’s debut in 2019 and Facebook’s chaotic first day in 2012. The process is centuries old (the Dutch East India Company held what is widely considered the first modern IPO in 1602). What changes is the scale. What stays the same is who benefits most.