IPO glossary

51 terms that come up in every IPO, explained in plain English.

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Accelerated bookbuild (ABB): A fast placement of shares with institutional investors, often overnight, used after the IPO by the company or large shareholders to sell further shares.
Admission to trading: The formal decision by an exchange that a company's shares may trade on a market or segment. Separate from the public offer of shares.
Allocation: The distribution of shares among investors who placed orders in the bookbuilding. In institutional offerings it is a judgement by the bookrunners, not a pro rata calculation.
Alternative performance measure (APM): A financial measure not defined by the accounting framework, such as adjusted EBITDA. In regulated information it must be defined and reconciled to the nearest reported figure.
Anchor investor: An investor who places a large order early in the bookbuilding, signalling demand to others.
Bookbuilding: The process of collecting investor orders, with quantities and price limits, to determine demand and set the offer price.
Bookrunner: A bank that manages the order book and distributes the shares. The lead bookrunners are usually also global coordinators.
Bring-down: Procedures repeated shortly before pricing or closing to confirm that nothing material has changed since the earlier due diligence or comfort letter.
Circle-up: The process of tracing every financial figure in the prospectus to its source and marking the evidence, as the basis for the auditors' comfort letter.
Closed period: A period before the announcement of financial results during which managers may not trade in the company's shares. Under MAR it is 30 calendar days.
Comfort letter: A letter from the auditors to the banks confirming procedures performed on financial information in the prospectus and, for the period after the latest balance sheet, giving negative assurance.
Cornerstone investor: An investor who commits before launch to buy a fixed amount of shares at the offer price, often disclosed in the prospectus and subject to a lock-up.
Coverage: How many times the shares offered are covered by investor demand, for example 'three times covered'.
Dilution: The reduction of existing shareholders' percentage ownership when new shares are issued.
Direct listing: Admission of existing shares to trading without an underwritten offering; the opening auction sets the first price.
Disclosure committee: An internal group, typically CEO, CFO, General Counsel and Head of IR, that assesses whether information is inside information and must be disclosed.
Dual-track process: Preparing an IPO and a sale of the company at the same time, then choosing the better outcome.
Due diligence: The investigation of the company's business, finances, legal and tax position by the banks and their advisers to support the accuracy of the prospectus.
Enterprise value (EV): The value of the operating business: equity value plus net debt and debt-like items, minus non-operating assets.
Equity story: The investment case for the company: why investors should own the shares, supported by measurable proof points.
Free float: The portion of shares held by investors who are free to trade them, as opposed to strategic or locked-up holdings.
Global coordinator: A lead bank that coordinates the IPO process, advises on structure and valuation and leads the syndicate.
Greenshoe (over-allotment option): An option that lets the banks sell more shares than the base offer, commonly up to 15%, and later buy those shares from the company or shareholders at the offer price if the share price holds.
Gross spread: In US practice, the difference between the price investors pay and the proceeds the issuer receives per share, which forms the underwriters' compensation.
Inside information: Precise information, not public, relating directly or indirectly to an issuer, which would likely have a significant effect on the share price if made public.
Insider list: A list the issuer must keep of all persons with access to inside information, with prescribed details.
Intention to float (ITF): The public announcement that a company plans an IPO, usually a few weeks before the price range is set.
Investor education: The phase before launch in which syndicate analysts present their research to investors and gather valuation feedback.
IPO discount: The difference between the offer price and the banks' estimate of fair value, intended to attract investors and support aftermarket trading.
Lock-up: An agreement that prevents the company and existing shareholders from issuing or selling shares for a period after the IPO without the banks' consent.
Managers' transactions: Trades in the company's shares by persons discharging managerial responsibilities and closely associated persons, which must be notified and published.
Market abuse regulation (MAR): The EU regulation governing inside information, insider dealing, market manipulation, insider lists and managers' transactions.
Money left on the table: The first-day price gain multiplied by the number of shares sold: a theoretical measure of proceeds forgone by underpricing.
Offer price: The final price at which shares are sold to investors in the IPO.
Pilot fishing: Confidential meetings with selected investors shortly before launch to test the equity story and valuation.
Post-money valuation: The equity value after the IPO, including the new money raised.
Pre-money valuation: The equity value before the new money raised in the IPO.
Price range: The range within which investors are invited to place orders, published at launch with the prospectus.
Primary shares: Newly issued shares; the proceeds go to the company.
Pro forma financial information: Illustrative financial information showing how a significant transaction would have affected historical results had it occurred earlier.
Prospectus: The legal offering document containing all information investors need to assess the company and the offer, approved by the competent authority.
Quiet period: A period around the IPO during which the company and banks limit public communication and research publication, under the applicable rules.
Roadshow: A series of meetings in which management presents the company to investors during the offer period.
Secondary shares: Existing shares sold by current shareholders; the proceeds go to the sellers, not the company.
SPAC: Special purpose acquisition company: a listed shell company that raises money to merge with a private company, which thereby becomes public.
Stabilisation: Price support by the stabilisation manager after listing, typically by buying shares in the market, permitted for a limited period under strict rules.
Syndicate: The group of banks underwriting and distributing the offering.
Underpricing: The tendency of IPO shares to close their first trading day above the offer price, on average.
Underwriting agreement: The contract in which the banks commit to buy the offered shares at the offer price, with representations, warranties, indemnities and conditions.
Use of proceeds: The stated purpose for which the company will use the money raised from new shares.
Working capital statement: A statement in the prospectus that the company has enough working capital for its present requirements, generally at least the next twelve months.