How does an IPO work? S-1, roadshow, pricing and the first trade

Key takeaways

• An IPO in the United States follows a fixed sequence: an optional confidential draft, a public S-1 on the SEC's EDGAR system, a price range, a roadshow, pricing night, and the first trade on an exchange such as Nasdaq or the NYSE.
• Under SEC staff procedures, a company that filed confidentially must make its S-1 public at least 15 days before the roadshow starts. That public filing is usually the first real signal that a listing is close.
• The IPO price is set the night before trading. The opening price is set by buy and sell orders on the exchange the next morning, so the two numbers can differ widely.
• Figma's 2025 IPO shows each step: its range was raised twice, the shares priced at $33, and the first trade was at $85.
• As of October 23, 2026, EDGAR full-text search shows no public S-1 from Anthropic or OpenAI. Anthropic has said it submitted a confidential draft on June 1, 2026.

How does an IPO work? A private company registers shares with the Securities and Exchange Commission, banks market them to investors at a price range, the price is fixed the night before listing, and trading opens on an exchange such as Nasdaq the next day.

How does an IPO work? The short version

An initial public offering (IPO) is the first time a company sells its shares to the general public. The SEC describes going public as a company's initial public offering, usually done to raise capital. Under the Securities Act of 1933, the company must file a registration statement with the SEC before it offers the shares. It cannot actually sell them until SEC staff declares that statement effective.

After the IPO, the company becomes a reporting company. That means quarterly and annual filings, audited accounts and public disclosure of material events. Founders, employees and early investors get a public market for their shares. The company gets new cash if it sells newly issued shares (a "primary" sale). Existing holders get cash if they sell their own shares (a "secondary" sale). Many IPOs mix both.

The process is managed by underwriters: investment banks that run the marketing, build the order book, and in a standard "firm commitment" deal buy the shares from the company and resell them to investors.

Step 1: The confidential filing and the public S-1

Most large U.S. IPOs now start out of public view. Since 2017 the SEC has accepted voluntary draft registration statements for nonpublic review from all issuers, not only "emerging growth companies". The SEC's staff comments go back and forth with the company and its lawyers in private, often over several rounds.

The private phase has a deadline. A company must publicly file its registration statement, together with the earlier drafts, at least 15 days before any roadshow. If there is no roadshow, the deadline is at least 15 days before the requested effective date. The SEC staff's draft-statement procedures, updated on March 3, 2025, set out this rule.

The public document is the Form S-1. It contains the preliminary prospectus: the business description, audited financial statements, risk factors, management's discussion of results, ownership tables and executive pay. Updates are filed as amendments, labelled S-1/A. Anyone can read all of these for free on EDGAR.

Before and after filing, companies may also "test the waters." Since the SEC adopted Rule 163B in September 2019, any issuer can hold talks with qualified institutional buyers and institutional accredited investors to gauge demand before launching an offering.

Step 2: The price range

The first public S-1 usually leaves the price blank. A later amendment adds the number of shares and an expected price range, for example $25 to $28 a share. That amendment marks the formal launch of the deal.

The range is the underwriters' estimate of what investors will pay, based on testing-the-waters meetings, valuations of comparable listed companies and market conditions. It is not binding. Companies can raise or cut the range during marketing by filing another amendment. Under the SEC's Rule 430A, a deal can also price somewhat outside the range without re-circulating a new preliminary prospectus, as long as the overall change stays within what lawyers call the "20% safe harbor."

Before any sale is confirmed, brokers must send the preliminary prospectus to expected buyers. The SEC's Rule 15c2-8 requires delivery at least 48 hours before confirmation of sale, which is why it is often called the "48-hour rule."

Step 3: The roadshow and book-building

The roadshow is the sales tour. Management and the bankers present the company to fund managers in group meetings, one-on-ones and, increasingly, a recorded online presentation. It typically runs for about one to two weeks, depending on the size of the deal.

At the same time the lead banks run book-building. Investors submit "indications of interest": how many shares they would buy, and sometimes at what maximum price. The bankers collect these into an order book. They watch how many times the deal is covered and how price-sensitive the demand is. Strong demand may lead to a higher range or more shares. Weak demand can mean a lower range, fewer shares or a postponed deal.

Indications of interest are not binding purchases. No sale can be completed until the registration statement is effective.

Pricing night, allocation and the first trade

When the book closes, the SEC declares the registration statement effective, usually the same afternoon. That evening the company and lead underwriters agree on the final price and the number of shares, and sign the underwriting agreement. This is "pricing night."

Allocation follows. The bankers, with the company's input, decide who receives shares and how many. Big institutions typically receive most of an IPO. Allocation is constrained by FINRA rules: Rule 5130 limits sales of new issues to accounts of "restricted persons," such as broker-dealer staff, and Rule 5131 bans "spinning," which means giving hot IPO shares to executives of current or prospective investment-banking clients.

The next morning the stock begins trading. On Nasdaq, the opening runs through the IPO Cross. Nasdaq first displays indicative prices and order imbalances. The lead underwriter then decides, in coordination with Nasdaq, when there has been enough price discovery to release the stock. A single auction price, the Nasdaq Official Opening Price, sets the first trade. This is why a stock that priced at $33 can open at a very different level, sometimes hours after the market opens.

Settlement, when the company receives the money and investors receive the shares, comes at the closing a day or so later.

Worked example: Figma's 2025 IPO

Figma, the design-software company, followed every step above in July 2025. The dates below come from SEC filings on EDGAR and Figma's own announcement. The prices come from CNBC's report of the debut.

Figma priced 36,937,080 Class A shares. The company sold 12,472,657 of them and existing stockholders sold 24,464,423, so Figma received no money from the secondary portion. At $33, the base deal was worth about $1.22 billion. The gap between $33 and the $85 open shows that pricing night and the first trade are separate events.

Lock-ups, the greenshoe and life after listing

Lock-ups. Insiders usually sign agreements not to sell their shares for a period after the IPO. Investor.gov notes that most lock-ups bar sales for 180 days, and that the terms must be disclosed in the prospectus. Lock-ups are contractual, not an SEC requirement, and some deals now release shares in stages. The expiry date is worth knowing because it can add a large supply of tradable shares.

The greenshoe. Underwriters normally sell more shares than the base deal, then hold an option to buy those extra shares at the IPO price. If the stock trades below the offer price, the banks can buy shares in the market to cover the short position instead, which supports the price. If the stock rises, they exercise the option. Figma's selling stockholders gave underwriters a 30-day option on up to 5,540,561 extra shares, equal to 15% of the base offering, which is the customary size.

Quiet periods and research. The banks that underwrote the deal typically begin publishing research some weeks after listing, under FINRA and SEC rules on research analysts. The company's first quarterly report as a public company follows a few months after the IPO.

How to read an S-1 in 15 minutes

An S-1 for a large technology company can run to hundreds of pages. A quick first reading can focus on the items set by the SEC's Form S-1 and Regulation S-K:

1. Prospectus summary (2 minutes). The company's own short pitch, key metrics and the offering terms: shares offered, primary versus secondary, and the proposed ticker and exchange.
2. Risk factors (4 minutes). Skim the headings, not every paragraph. Look for risks specific to this company, such as customer concentration, dependence on one supplier, litigation, or regulatory exposure, rather than generic ones.
3. Use of proceeds (1 minute). What the company will do with the money. "General corporate purposes" is common. Repaying debt or paying insiders tells you more.
4. Capitalization and dilution (2 minutes). Debt levels, and how much book value per share new buyers get compared with the price they pay.
5. Selected financials and MD&A (4 minutes). Revenue growth, gross margin, operating loss or profit, cash burn, and any large commitments, such as compute or lease contracts.
6. Principal stockholders and description of capital stock (2 minutes). Who owns what, and whether there are several share classes with different voting rights. Dual-class structures can leave founders in control even with a minority of the economic stake.

Each later S-1/A shows what changed, usually updated financials, the price range or the share count.

The 2026 AI IPO talk: what is actually on file

Much of this year's interest in IPOs comes from the largest AI developers. It helps to separate filings from reports.

• Anthropic. Anthropic said on June 1, 2026 that it had confidentially submitted a draft registration statement on Form S-1 to the SEC. It said the number of shares and the price "have not yet been set." Media reports since then have described the contents of a draft prospectus. Bullquill covered the reported loss figures in its report on Anthropic's first-half results.
• OpenAI. OpenAI confidentially submitted a draft S-1 in June 2026, according to media reports, and its finance chief has said a listing is expected in 2027. Its latest private funding talks are covered in our report on the reported $30 billion raise.
• What EDGAR shows. A Bullquill search of EDGAR full-text search on October 23, 2026 found no public S-1 filed by either company. The names appear only as mentions in other companies' filings.

Under the 15-day rule, a public S-1 from either company would have to appear on EDGAR at least two weeks before its roadshow. Until then, any reported IPO date, valuation or price range is a projection, not a filed term. Share-class design is also likely to matter in these deals. Bullquill's piece on Meta's non-voting share class explains why voting structure draws investor attention.

What it means

An IPO has three separate prices. The range is an estimate, the IPO price is set by the order book on pricing night, and the opening price is set by the exchange auction the next morning. Headlines often blur them. Knowing the sequence makes it easier to read news about a coming listing. A confidential filing means the process has started. A public S-1 means a launch is likely within weeks. A price range means marketing has begun. Pricing means the deal is done.

For readers following the AI companies, the most reliable signal is a public filing on EDGAR, not a reported target date. After the listing, the lock-up expiry, the greenshoe exercise and the first quarterly report are the dates that typically draw attention. For general money basics before looking at any market, see Bullquill's guide on how to build an emergency fund.

Sources

• SEC Investor.gov: Investor Bulletin – Investing in an IPO
• SEC Investor.gov: Initial public offerings, lockup agreements
• SEC: Going public
• SEC Division of Corporation Finance: Draft registration statement processing procedures
• SEC: Form S-1 (instructions)
• SEC press release 2019-188: Rule 163B "test-the-waters" for all issuers
• Federal Register (Aug. 30, 2018): SEC notice on Rule 15c2-8 prospectus delivery
• Cooley: Upsizing or downsizing an IPO under Rule 430A
• FINRA Rule 5131: New issue allocations and distributions
• FINRA Rule 5130: Restrictions on the purchase and sale of initial equity public offerings
• Nasdaq: IPO Cross fact sheet
• SEC EDGAR full-text search: "Anthropic, PBC" in S-1 filings (checked Oct. 23, 2026)
• Anthropic: Anthropic confidentially submits draft S-1 (June 1, 2026)
• TechRepublic: OpenAI starts IPO process with confidential SEC filing
• Figma: Figma announces pricing of initial public offering
• CNBC via NBC Miami: Figma opens at $85 per share on NYSE

This article is for information only and is not investment advice.