How an IPO works
An IPO, or initial public offering, is the first time a private company sells shares to the public and lists on an exchange. Underwriting banks set a price range, gauge demand from large investors, and the stock begins trading on listing day. It lets the company raise capital and lets early backers and employees sell, while the public gets its first chance to own a stake.
Worked example
A company prices its IPO at $20 and raises capital on that basis. On listing day, retail demand pushes the first trade to $28, a 40% pop, then it drifts back to $22 over the following weeks as the initial frenzy fades. Buyers at the $28 open paid a price the company never received; the volatility around a new listing is often extreme because there is no trading history to anchor it.
Trading new listings on Volity
A freshly listed stock has thin history, wide spreads, and sharp swings, so disciplined position sizing matters more than usual. On Volity you can hold a new listing as a real share once it settles, or trade the early volatility as a CFD with retail leverage capped at 5:1 on single stocks, where negative balance protection limits the worst case to your deposit.
Why it matters
IPOs carry a powerful story and the weakest data, a combination that produces both big winners and fast collapses. The first-day pop is rarely available at the listed price, and lock-up expiries can flood the market with insider shares months later. Treat new listings as high-variance. Related: volume.
Learn more in our stocks trading guide.
