Glossary · 37 terms
IPO
All ipo terms in the EquitiesAmerica.com glossary — plain-English definitions for American investors.
Aftermarket Performance(IPO aftermarket)
Aftermarket performance refers to the price behavior of a newly issued stock in the secondary market following its IPO, encompassing the first-day trading return, the short-term trajectory through the quiet period, and the longer-run return relative to the offering price or comparable benchmarks.
Blank Check Company
A Blank Check Company is a development-stage company that has no specific business plan or purpose, or has indicated its plan is to engage in a merger or acquisition, giving management broad discretion to apply raised capital — a category that includes SPACs but historically also encompassed more loosely regulated 'blind pool' ventures.
Book Building(IPO book building)
Book building is the process used by underwriters to gauge institutional investor demand for an IPO and establish an appropriate offering price before shares begin trading on an exchange.
Broken IPO(failed IPO)
A Broken IPO is an offering in which the stock price falls below the IPO offer price in aftermarket trading, signaling weak demand, poor pricing, or deteriorating market conditions.
Confidential IPO Filing(DRS submission)
A confidential IPO filing, formally known as a draft registration statement (DRS) submission, is the practice by which qualifying companies submit their IPO registration documents to the SEC for review before making the filing public, allowing issuers to work through SEC comments privately and without exposing sensitive information to competitors.
Cornerstone Investor(cornerstone anchor)
A Cornerstone Investor is a large, reputable institution that commits to purchasing a fixed allocation of IPO shares before the offering opens to the general investor public, typically in exchange for a guaranteed allocation.
De-SPAC Transaction(SPAC merger)
A De-SPAC Transaction is the business combination through which a Special Purpose Acquisition Company merges with or acquires a private operating company, effectively taking that private company public without a traditional IPO and converting the SPAC shell into a publicly listed operating entity.
Direct Public Offering(direct listing)
A direct public offering (DPO), also called a direct listing, is a path to going public in which a company lists its existing shares on a stock exchange without conducting a traditional underwritten offering, raising no new capital and bypassing the conventional IPO underwriting process.
Dutch Auction IPO(auction IPO)
A Dutch auction IPO is an offering mechanism in which investors submit bids specifying the number of shares they want and the maximum price they will pay, with all winning bidders ultimately paying the same clearing price — the lowest price at which the full offering can be sold.
Effective Date (SEC)(SEC effectiveness)
The Effective Date is the date on which the SEC declares a company's registration statement to be effective under the Securities Act of 1933, authorizing the public sale of the registered securities and allowing the issuer and underwriters to complete and settle IPO transactions with investors.
Emerging Growth Company (EGC) IPO(EGC)
An Emerging Growth Company (EGC) is a classification established under the Jumpstart Our Business Startups (JOBS) Act of 2012 that grants qualifying companies reduced disclosure obligations and phased compliance requirements when accessing U.S. public capital markets, most notably during an IPO.
First Day Pop(IPO pop)
The first day pop refers to the percentage increase in an IPO stock's price from its offering price to its closing price on the first day of public trading, widely viewed as a measure of how much money the company left on the table.
Flipping (IPO)(IPO flip)
Flipping in the IPO context refers to the practice of selling IPO shares immediately or within days of listing to capture the first-day price pop, rather than holding as a long-term position.
Forward Purchase Agreement
A Forward Purchase Agreement (FPA) is a contract, commonly used in SPAC structures, in which a sponsor or anchor investor commits in advance to purchase a specified number of shares at a set price at the time of the de-SPAC merger, providing the SPAC with a committed source of additional capital before a target has been identified.
Free Writing Prospectus(FWP)
A Free Writing Prospectus (FWP) is any written communication used to offer or sell securities after a registration statement has been filed with the SEC that contains information beyond what appears in the statutory prospectus, and which must be filed with the SEC and include specific legends identifying it as subject to a full registration statement.
Greenshoe Option(overallotment option)
A greenshoe option, formally known as an overallotment option, is a provision in an underwriting agreement that gives underwriters the right to sell additional shares — typically up to 15% more than the original offering size — to stabilize the stock price after an IPO.
Hot IPO(oversubscribed IPO)
A Hot IPO is an initial public offering that is heavily oversubscribed during bookbuilding, typically resulting in a significant price increase on the first day of trading.
Initial Public Offering(IPO)
An initial public offering (IPO) is the process by which a private company first sells shares of its stock to the public on a registered securities exchange, transitioning from private to public ownership.
IPO Allocation(IPO share allocation)
IPO allocation refers to the process by which underwriters distribute shares of a newly public company to investors, determining how many shares each participating investor receives at the offering price.
Large Accelerated Filer(LAF)
A Large Accelerated Filer is an SEC-defined issuer category for publicly traded U.S. companies with a public float of $700 million or more, which triggers the most stringent filing deadlines and the full set of public company disclosure obligations, including mandatory auditor attestation on internal controls.
Lock-Up Period(lock-up expiration)
A lock-up period is a contractual restriction that prevents company insiders — including executives, directors, employees, and pre-IPO investors — from selling their shares for a specified period after the IPO, typically 90 to 180 days.
Lockup Expiration Effect(lockup expiry)
The lockup expiration effect is the documented pattern of abnormal negative returns and elevated trading volume observed around the date on which IPO lockup agreements expire, enabling pre-IPO shareholders including founders, executives, employees, and pre-IPO investors to sell their shares on the public market for the first time.
PIPE Investment(PIPE)
A PIPE (Private Investment in Public Equity) is a private placement of newly issued shares or convertible securities directly to institutional investors at a negotiated price, allowing public companies to raise capital quickly without the time and expense of a registered public offering.
Pre-IPO Placement(pre-IPO round)
A Pre-IPO Placement is a private sale of shares in a company to select institutional or accredited investors before the company launches its formal initial public offering process.
Prospectus (S-1 Filing)(S-1)
A prospectus is the official disclosure document a company must file with the SEC before conducting a public offering, with the S-1 being the registration form used by domestic issuers for an initial public offering.
Quiet Period(waiting period)
The quiet period is a legally prescribed interval before and after an IPO during which the company, its underwriters, and affiliated analysts are restricted in what public statements they can make about the issuer.
Quiet Period (post-IPO)(IPO quiet period)
The post-IPO quiet period is the window of time following a company's initial public offering — traditionally 25 days under FINRA rules, though commonly extended by underwriter practice — during which underwriters and other participants who were involved in the IPO refrain from publishing research reports or making public recommendations on the newly listed stock.
Red Herring Prospectus(preliminary prospectus)
A Red Herring Prospectus is a preliminary prospectus filed with the SEC as part of an IPO registration statement that includes substantially all material disclosures about the issuer but omits the final offering price, the number of shares to be sold, and other pricing-related terms that are finalized only at the close of the book-building process.
Research Initiation(initiation of coverage)
Research initiation refers to the first publication of a formal equity research report covering a newly public company, typically issued by the investment banks that managed the IPO at the expiration of the post-offering quiet period, establishing a price target and investment rating on the newly listed stock.
Roadshow(IPO roadshow)
An IPO roadshow is a series of presentations and meetings conducted by a company's management team and underwriters with institutional investors across major financial centers to market the offering and build the order book.
Secondary Market (Post-IPO)(aftermarket)
The Secondary Market, in the post-IPO context, refers to the public stock exchange where shares already sold in an IPO trade freely between investors without further involvement by the issuing company.
Shelf Registration(shelf registration statement)
A Shelf Registration is a securities registration statement filed with the SEC under Rule 415 that allows an issuer to register a large amount of securities in advance and then offer and sell them incrementally over a period of up to three years, without filing a new registration statement for each offering.
Smaller Reporting Company(SRC)
A Smaller Reporting Company (SRC) is an SEC-defined issuer classification for publicly traded U.S. companies that fall below specified revenue and public float thresholds, entitling them to scaled disclosure requirements across periodic reports, registration statements, and proxy filings.
Special Purpose Acquisition Company(SPAC)
A Special Purpose Acquisition Company (SPAC) is a blank-check shell corporation that raises capital through an initial public offering with no operating business, holding proceeds in trust while searching for a private company to merge with and take public within a defined timeframe, typically two years.
Stabilization Agent(stabilizing manager)
A Stabilization Agent is the lead underwriter designated to support the market price of a newly listed stock in the immediate aftermarket by purchasing shares if the price falls below the IPO offer price.
Testing the Waters(TTW)
Testing the Waters (TTW) is a JOBS Act provision that allows Emerging Growth Companies to engage in preliminary oral or written communications with qualified institutional buyers and institutional accredited investors before or after filing a registration statement, in order to gauge interest in a potential IPO before committing to the full offering process.
Underwriter(bookrunner)
In the context of an IPO, an underwriter is an investment bank or broker-dealer that manages the offering process, helps price the shares, and assumes the risk of distributing them to investors.