Exits and alternatives
IPOs and going public
The map of listing — traditional IPOs, lockups, preferred conversion, direct listings and why companies stay private longer.
An initial public offering (IPO) is the traditional way a private company lists shares on a public exchange and sells new stock to public investors. Going public is a permanent shift: continuous pricing, disclosure, and liquidity for holders after lockups expire. For employees and founders it is often the first time equity can be sold in size without a special tender.
Most startups never get here. Those that do have usually spent a decade raising private capital, building a large revenue base, and using secondaries to relieve pressure along the way.
Why go public — and why it costs
Reasons to list: raise a large primary (traditional IPO); create a market where employees, founders and early investors can eventually sell; use public stock as currency for acquisitions and liquid RSUs; signal permanence to customers and talent.
Costs: quarterly and annual reports, proxies, material-event disclosures (competitors read them too — see reading company financials); independent directors, audit committees, SOX-style controls for US issuers; underwriting and professional fees in the millions; public markets that punish missed quarters.
Trade-off
Stay private when you still need secrecy, have ample private capital, and can offer employee liquidity via tenders. Go public when you want permanent liquidity currency, a large primary raise, or have outgrown what private markets price well. Staying private longer is rational for many. Staying private forever while promising IPO-like equity outcomes is a tension that secondaries only partly solve.
From the 2010s onward, large tech companies routinely stayed private past valuations that once forced a listing. Drivers: abundant late-stage private capital, secondary tenders, a wish to avoid scrutiny while scaling, and cyclical IPO windows. Consequence: employees wait longer; 409A and tenders matter more; "pre-IPO" can mean many years.
Concepts in this section
| Step | Concept | What it answers |
|---|---|---|
| 1 | The traditional IPO | Who sets the offering price, and why is the first trade higher? |
| 2 | IPO lockups | When can insiders actually sell? |
| 3 | Preferred stock at IPO | Do preferences survive listing? |
| 4 | Direct listings and SPACs | What if you skip the classic book-built IPO? |
Common mistakes
- Reading the pop as employee payday. Offering price ≠ trading price ≠ what you can sell. See lockups.
- Comparing a sale to an IPO without conversion. A qualifying IPO usually collapses preferred into common; M&A pays the waterfall first.
- Promising IPO-like liquidity while staying private indefinitely. Tenders help; they are not a public market.
Key takeaways
- IPOs raise primary capital, create public liquidity, and impose permanent disclosure and governance costs.
- Employees mostly meet the stock after lockup, not on day one.
- Preferred typically converts on a qualifying IPO — unlike preference-heavy M&A.
- Direct listings and SPACs are other doors, with different price discovery and dilution.
- Staying private longer shifts the liquidity burden onto secondaries.
Further learning
A clear walkthrough of underwriting, the S-1, the roadshow and the offering-price gap:
Bill Gurley on staying private, public-market structure and liquidity pressure:
Related
The traditional IPO
Underwriters, the S-1, the roadshow, the offering price and the first-day pop — how a company actually lists.
Secondaries and tender offers
Liquidity before exit for founders and employees: secondary sales, tender offers and their rules.
Mergers and acquisitions
How acquisitions work: motives, process, consideration, the waterfall and what happens to employee equity.