How do you read news about IPOs, offering prices, and lock-ups?
The initial offering price of a stock may differ from the price at which it trades in the market.
Table of contents
Remember this first
First, 3 things to remember
- 1An IPO refers to a company offering its shares to the public for the first time.
- 2The offering price differs from the actual trading price after listing.
- 3A lock-up expiration means shares can be sold, not that they will all be sold.
The offering price is the price determined during the initial sale process.
An IPO is also known as an initial public offering. The stock sale price set at this time is called the offering price. The price after trading begins on the exchange fluctuates based on supply and demand.
Let's say the offering price is 10 dollars, the first market trading price is 18 dollars, and the current price is 15 dollars. It is 50% higher than the offering price, but it is a decline for someone who bought at 18 dollars. It is important to know which price you are comparing it to.
Not all shares are available for sale from the beginning.
Founders or early investors may have an agreement not to sell their shares for a certain period. This is called a lock-up. When it applies and to what volume varies by contract.
Just because a lock-up has ended does not mean those people will sell everything immediately. Distinguish between the "volume that becomes eligible for sale" and the "volume actually sold."
Look for these three things in the prospectus.
A prospectus is a document that discloses what is being sold and under what conditions. Check whether the company is selling new shares or existing shareholders are selling their own, and how the proceeds will be used.
Newly listed companies have different business and financial conditions. Do not assume they are cheap or profitable just because they are new.
You should not make such assumptions
“Once the lock-up period ends, all shares are sold that day.”
Reaching the point where shares can be sold does not mean they were all sold on that day.
Check what you have read.
- Have you compared the offering price and the current price?
- Have you verified who is selling the shares?
- Have you read the duration and conditions of the lock-up?
Apply what you read to the actual screen
Try it on WAPE
Source and scope of verification
Reviewed · Version 2
- Investing in an IPONew window
SEC Investor.gov · Verify 2026-10-20
Distinction between public offering/market price, restricted stock, and lock-up agreements
This is educational material for observation and information comprehension. Hypothetical examples do not represent actual stocks or performance and do not provide buy or sell recommendations.