How an IPO Actually Works: S-1, Roadshow, Greenshoe, Lock-Up

TL;DR. An initial public offering (IPO) is the first time a private company sells its shares to public investors. Under the hood it is a nine-to-twelve-month process built around one core SEC filing (Form S-1), a two-week investor roadshow that produces a demand book, a pricing meeting the night before trading opens, and a bundle of post-listing mechanics — the underwriters’ greenshoe over-allotment, the 90-to-180-day insider lock-up, and the 25-day analyst quiet period — that shape the stock’s first six months as much as the offering price itself.

Why revisit this now? Anthropic filed confidential IPO papers with the SEC on June 1, 2026 and is targeting a fall 2026 listing at a private valuation near $965 billion, while lining up a $10 billion revolving credit facility from Morgan Stanley, Goldman Sachs and JPMorgan — the same banks likely to lead the offering. The steps below are exactly what its S-1, roadshow and pricing meeting will look like.

Why companies go public in the first place

An IPO does three things at once. It raises primary capital for the company by issuing new shares, it creates liquidity for existing holders (founders, employees and venture funds) who can sell secondary shares in the offering or wait out the lock-up, and it creates a listed currency the company can use for acquisitions, stock-based compensation and follow-on offerings. The SEC’s own investor education pages define an IPO as simply the point “when a company first sells its shares to the public” (SEC Investor.gov: Initial Public Offering (IPO)).

The trade-off is loss of privacy and optionality. Once public, the company files audited financials every quarter (Form 10-Q) and annually (Form 10-K), discloses material events on Form 8-K within four business days, has to run a proxy process for shareholder votes, and lives inside Regulation FD, which forces material information to be released to everyone at the same time. Boards that used to make five-year bets in private now report to a quarterly earnings audience.

The six steps of a US IPO

1. Pick the bankers and file confidentially

The company hires a lead left underwriter (the bank listed first and left on the S-1 cover, which runs the book), one or two joint bookrunners, and a syndicate of co-managers. Fees on a large tech IPO typically total around 7% of the deal size on smaller offerings and step down to 2–3% on multi-billion-dollar deals, split between the lead and the syndicate.

Since the 2012 JOBS Act, most issuers file the first draft of Form S-1 confidentially with the SEC as an “emerging growth company” and only make it public 15 days before the roadshow starts. Anthropic’s June 2026 confidential submission is a textbook example.

2. Draft the S-1

The S-1 is the registration statement and the prospectus that goes to investors. It contains audited financials for the last two fiscal years (three for larger companies), the business description, risk factors, use of proceeds, management’s discussion and analysis (MD&A), executive compensation, related-party transactions, and the capitalisation table. It is the single most important document in the whole process — almost every question an investor asks on the roadshow can be answered by pointing to a page number in the S-1.

Drafting takes 8–12 weeks. The lawyers, auditors, underwriters’ counsel and company management assemble at “the printer” for line-by-line edits, with SEC comments arriving every 30 days. Wikipedia’s summary of the process notes that final edits are “actually performed at the printer, wherein … the issuer, issuer’s counsel, underwriter’s counsel, the lead underwriter(s), and the issuer’s accountants/auditors make final edits” (Wikipedia: Initial Public Offering).

3. The quiet period and the roadshow

Between filing and pricing the company is inside a pre-effective quiet period: management can talk to investors only through the prospectus and can’t promote the deal in the press. The instant the SEC declares the S-1 effective, the underwriters kick off a two-week roadshow — usually one week in the US, one week in Europe and Asia — where the CEO and CFO present the same deck 8–12 times per day to institutional investors. In parallel, the syndicate desk runs bookbuilding: it collects indications of interest at various price points and constructs a demand curve for the shares.

4. Pricing night

The evening before trading begins, the company’s board and the lead underwriters meet to fix the offering price. There are three inputs: the demand book (how many shares are wanted at each price), market conditions (the S&P 500 close, sector comparables, the VIX), and the company’s own risk appetite. Price too high and the deal “breaks issue” and trades below the IPO price on day one, embarrassing the company and burning the underwriters’ institutional relationships. Price too low and the company leaves millions of dollars on the table — the difference between the IPO price and the first-day close is money that could have gone into the company’s bank account.

5. First day of trading

The next morning, the company’s stock opens for continuous trading on NYSE or Nasdaq. The opening auction matches supply and demand across all resting orders, and the first print is usually well above the IPO price on hot deals. That gap between IPO price and first trade is the classic “IPO pop.” The lead underwriter’s trading desk runs a stabilising bid under the offering price to defend the deal if it weakens (SEC Regulation M explicitly permits price-stabilisation activity by underwriters in a new offering).

6. Greenshoe, lock-up and quiet period #2

After the shares are allocated, three post-IPO mechanics kick in:

Greenshoe (over-allotment option). The underwriters have the right — but not the obligation — to buy up to 15% additional shares from the company at the IPO price within 30 days of the offering. If the deal is hot they exercise it (extra fees plus more inventory for happy clients). If the deal weakens, they instead cover their short by buying in the open market, which supports the price. The clause is named after the Green Shoe Manufacturing Company (now Stride Rite), the first issuer to use it in a US IPO.
Lock-up period. Insiders (founders, employees, VCs) sign a contractual lock-up agreement with the underwriters — not the SEC — promising not to sell any shares for typically 90 to 180 days. When the lock-up expires, a flood of insider supply can hit the market and pressure the stock, which is why sophisticated investors mark the lock-up expiry date on their calendars from the day of the IPO.
Analyst quiet period. A second quiet period runs for 10 calendar days after the first day of trading, during which the underwriter analysts cannot publish research reports or price targets on the newly public company. The rule is intended to separate the sell-side’s underwriting relationship from its research view.

A concept diagram: the IPO timeline end-to-end

Source: Author, drawing on Wikipedia: Initial Public Offering and SEC filing conventions.

Worked example: Reddit’s March 2024 IPO

Reddit’s March 2024 IPO is a compact illustration of every step above.

The filing. Reddit filed its S-1 publicly in February 2024 after years as a private company backed by Advance Publications, Sam Altman, Fidelity and others. The prospectus set the price range at $31–$34 per share.
The pricing. On the evening of March 20, 2024, Reddit priced its IPO at $34, the top of the range — a positive signal that the demand book was oversubscribed at the highest indicated price.
The pop. On March 21, RDDT opened on the NYSE at $47 and closed at $50.44. Investors who received an allocation at $34 saw a first-day return of about +48%; the company received the $34 cash from each share it sold in the deal, so the $16.44-per-share gap was “money left on the table.”
Post-IPO mechanics. Underwriters had a standard 15% greenshoe. The lock-up ran for 180 days, expiring in mid-September 2024 — a well-signposted date at which insider selling could reappear.

Reddit was a “good” IPO by conventional metrics: it priced at the top of the range, popped on day one, and stayed above the IPO price. It was also a case study in how the company itself captured only a fraction of the “true” market clearing price, which is the recurring criticism of the bookbuilding process.

Notable US IPOs and their first-day performance

Company	Date priced	Ticker	IPO price	First-day close	First-day %	Amount raised
Facebook	May 18, 2012	FB (Nasdaq)	$38.00	$38.23	+0.6%	$16.0B
Airbnb	Dec 10, 2020	ABNB (Nasdaq)	$68.00	n/d	large pop	$3.5B
Rivian	Nov 10, 2021	RIVN (Nasdaq)	$78.00	$100.73	+29.1%	$13.5B
Reddit	Mar 20, 2024	RDDT (NYSE)	$34.00	$50.44	+48.4%	$748M

Sources: Wikipedia entries for each issuer — Facebook IPO, Airbnb, Rivian, Reddit, Inc. Airbnb first-day close not disclosed in the summary; the company’s shares more than doubled on debut per contemporaneous reporting. “Amount raised” is the base offering, before greenshoe.

First-day pop: how much is normal?

Individual IPO returns: Wikipedia (as sourced above). *Long-run US first-day average around +18% is a rough figure from Jay R. Ritter’s IPO data at the University of Florida, which maintains the authoritative dataset covering January 1980–December 2025.

Academic work by Jay R. Ritter, who has tracked US IPOs since 1980, shows that the average first-day return has hovered in the mid-teens percentage-wise over long periods, spiking in hot markets (the 1999–2000 dot-com window saw averages of 60%+) and collapsing to low single digits in cold ones. Two things follow from the data. First, the “normal” pop is real — underwriters tend to price below the clearing level to reward institutional buyers and reduce deal risk. Second, long-run post-IPO returns are less flattering: Ritter’s research documents multi-year underperformance for the median IPO relative to size-matched benchmarks, which is why buying every hot listing is a bad passive strategy.

Common misconceptions

“A big first-day pop means it’s a good IPO.” From the company’s perspective it is the opposite: a 50% pop means the shares sold to institutions were priced 50% below what the market was willing to pay, and that gap is a real cost to the issuer. A well-priced IPO trades within a few percent of its offering price on day one.
“Retail investors can just buy IPO shares.” Very few brokers allocate IPO shares to retail accounts, and the ones that do (Fidelity, Schwab, some Robinhood tiers on select deals) require high account balances and heavy activity. Most retail participation happens through the open market after the shares begin trading — usually at the popped price, not the IPO price.
“The lock-up is an SEC rule.” No — the lock-up is a contractual promise between insiders and the underwriters, not a statutory requirement. Underwriters can and occasionally do release insiders early, and the standard 180-day period can be waived in negotiated blocks.
“Direct listings and SPACs are the same as IPOs.” They aren’t. A direct listing (Spotify 2018, Coinbase 2021) skips the underwriter-sold offering entirely — existing shares just start trading, no new capital is raised, no lock-up, no greenshoe. A SPAC merger takes a company public via reverse merger with a listed shell, using a different disclosure document (Form S-4 rather than S-1) and typically no roadshow.

Related concepts and what to learn next

Follow-on offerings. After the IPO, the company can sell additional shares via a follow-on (or “secondary”) offering on Form S-3 — a much shorter document available to companies with a seasoned filing history.
Direct listing vs traditional IPO. Trade-offs are cost (direct listings avoid the 3–7% underwriting spread) versus certainty (a traditional IPO comes with a firm-commitment underwritten book).
Book vs auction pricing. Google’s 2004 IPO used a Dutch auction; almost every other large US listing uses bookbuilding. Both aim at the same problem — discovering a clearing price without the deal breaking.
Convertible bonds and PIPEs. Many post-IPO companies raise their next dollar via convertible bonds rather than a secondary equity deal, to avoid dilution in a soft tape.

Sources

Disclosure: This article is for informational purposes only and is not investment advice.