IPO (Initial Public Offering) is the first time a private company sells shares to the public and has them admitted to trading on a stock exchange. It can include new shares that raise capital and existing shares that give founders and early investors liquidity. Underwriting banks prepare a regulator-approved prospectus, run a bookbuild among institutional investors and set the offer price, while lock-ups limit early selling. Afterwards the company carries continuous disclosure, governance and periodic reporting obligations. The UK Listing Rules since 29 July 2024 require a 10% free float and £30 million market capitalisation but no revenue track record. For licensed fintechs, large allocations can cross qualifying holding thresholds that require advance regulatory notification.
How does an IPO work
The company appoints investment banks as underwriters, prepares audited accounts and a prospectus, and has the prospectus approved by the securities regulator. The banks run a bookbuild, collecting orders from institutional investors at different prices, and set the final offer price; trading usually starts within days. Founders and pre-IPO investors normally sign lock-up agreements that stop them selling for a contractually agreed period, so the free float stays limited at first.
Illustrative example: a payments company with 170 million shares sells 20 million new shares at £5 and its existing investors sell another 10 million. The company raises £100 million before fees, the selling shareholders receive £50 million, and the 30 million shares offered represent about 15.8% of the 190 million in issue after listing.
What are the listing requirements in the UK and US
The FCA's UK Listing Rules, in force since 29 July 2024, replaced the premium and standard segments with a single category for equity shares in commercial companies. That category keeps a minimum 10% free float and £30 million market capitalisation but no longer requires a three-year revenue track record, which opened the main market to younger, loss-making fintechs. In the US, a company with less than $1.235 billion of annual revenue can file as an emerging growth company, allowing scaled-down disclosure for up to five fiscal years after its IPO.
IPO vs SPAC vs trade sale
A SPAC merger reaches listed status by combining with a shell company that has already raised cash, trading pricing risk for dilution from sponsor shares and warrants. A trade sale to a strategic buyer or private equity fund can deliver 100% liquidity at completion, while an IPO usually sells a minority stake and leaves the rest exposed to the share price. Many fintechs run a dual track, preparing for a listing while taking M&A offers, and choose whichever values the business higher.
What it means for regulated fintechs going public
For a licensed EMI, payment institution or bank, the listing can trigger change-of-control filings. Under EU rules, any investor acquiring a qualifying holding of 10% or more in the licensed entity, or crossing 20%, 30% or 50%, must notify the regulator in advance, and for banks the regulator has up to 60 working days to assess it. Large allocations to cornerstone investors are therefore checked against those thresholds before the book closes, and the prospectus discloses licence conditions, regulatory capital requirements and any open investigations as risk factors.