When a private company decides to sell shares to the public for the first time, it holds an IPO. Here’s how a company lists on the ASX, who gets the shares, and what investors should watch for.
An initial public offering, often called an IPO or a “float”, is the moment a private company becomes a public one. It sells shares to investors and lists them on a stock exchange, such as the Australian Securities Exchange, where they can then be bought and sold by anyone.
Companies list for two main reasons. Some want to raise money to expand, pay off debt or fund new projects. Others list so their founders, private equity owners or early investors can sell some or all of their stake. Many IPOs do both.
Being listed also gives a company a public share price, which it can use to raise more money later or to pay for takeovers.
How an IPO works
A company planning to list hires investment banks to manage the float. They help prepare a prospectus, a detailed document setting out the company’s business, finances, risks and how the money raised will be used. In Australia, the prospectus is lodged with ASIC.
The banks then gauge demand from large investors, such as super funds and fund managers, in a process called a bookbuild. Their bids help set the final price for the shares.
To list on the ASX, a company must meet requirements on its size, its profits or assets, and how many shareholders it will have.
Once the shares are allocated, the company starts trading on the ASX, usually under a three-letter code. Its first-day performance is closely watched as a sign of investor confidence. A recent high-profile example was Virgin Australia, which returned to the ASX in June 2025, five years after collapsing into administration.
Getting shares, and the risks
In big IPOs, most shares go to institutional investors. Everyday investors can sometimes apply through a broker that is involved in the float, or through a public offer set out in the prospectus, but demand can mean they receive fewer shares than they asked for.
Buying into an IPO carries particular risks. There’s no trading history to judge the share price against, and the sellers usually know far more about the business than buyers do. Some floats are priced to give owners the highest possible return, leaving little upside for new investors.
Some IPOs soar on their first day, while others fall below their offer price and stay there. Reading the prospectus, especially the section on risks, is the best place to start.
