Term · Capital Measures & Financing
IPO
In briefAn IPO (Initial Public Offering) is the first public placement and stock exchange admission of shares, usually based on an approved prospectus. In small caps the volume is often small and the free float low. Structure and use of proceeds shape later tradability and dilution.
Definition
An IPO (Initial Public Offering) denotes the first-time placement of a company's shares on the organized capital market. New or existing shares are offered publicly and admitted to stock exchange listing. The basis is generally an approved securities prospectus.
Why it matters for small caps
In small caps, the IPO is often carried out on a small scale and with limited free float. The structure, valuation, and use of proceeds of the IPO shape later tradability and dilution potential.
Common misreadings
- An IPO is not the same as a direct listing: in an IPO, shares are typically placed with capital inflow; in a direct listing, no classic issuance takes place.
In the process
Frequently asked
How does an IPO differ from a direct listing?
In an IPO, shares are typically placed and capital is raised. In a direct listing, existing shares are merely admitted to trading, without a classic issuance.
What role does the prospectus play?
The approved securities prospectus bundles mandatory disclosures on business, risks, and financial position. It is the central source of information before subscribing.
Why is free float relevant in small IPOs?
A low free float can lead to thin trading and larger price swings and makes building and reducing positions more difficult.
Related terms
Sources
Primary
ESMA / EU-Prospektverordnung (VO (EU) 2017/1129)
https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX:32017R1129
https://eur-lex.europa.eu/legal-content/DE/TXT/?uri=CELEX:32017R1129
Education only, not investment advice. Ranges and thresholds are didactic orientation values, not an official standard.