How IPOs Work: How Regular Investors Can Buy IPO Stock

2026 has been the year of the mega-IPO. SpaceX raised a record $75 billion when it listed in June, and more giant names are lining up. If you have ever wondered whether you can get in on a hot IPO, and whether you should, here is how the process actually works for regular investors.

What is an IPO?

An initial public offering (IPO) is the first time a private company sells shares to the public and lists them on a stock exchange such as the Nasdaq or the New York Stock Exchange. Before the IPO, the company is owned by founders, employees and private investors like venture capital funds. After it, anyone with a brokerage account can buy the stock.

Companies go public to raise money for growth, to let early investors and employees cash out over time, and to use their stock as currency for acquisitions. SpaceX, for example, agreed to buy the coding startup Cursor for $60 billion in stock just four days after listing.

How an IPO happens, step by step

1. The company hires investment banks (the "underwriters") to manage the sale.
2. It files a registration statement with the SEC, called an S-1. Many companies first file confidentially, then make the S-1 public a few weeks before the deal. The S-1 is the most important document for investors: it shows revenue, losses, risks and who owns what.
3. The roadshow. Executives and bankers pitch the stock to big investors such as mutual funds and pension funds, usually over one to two weeks.
4. Pricing. The night before trading starts, the company and its bankers set the final IPO price based on demand. Shares are allocated to the investors who placed orders.
5. First day of trading. The stock opens on the exchange, often at a price very different from the IPO price, and anyone can buy it from that point on.

The two ways regular investors can buy

1. At the IPO price, through your broker

Most IPO shares go to large institutions, but several brokers now set aside a slice for individual customers. Robinhood, SoFi, Fidelity, Schwab and E*Trade (Morgan Stanley) have all offered IPO access on some deals. The usual process:

• You request shares in the app during the offering window, often with a price range shown.
• Allocations are limited. On a hot deal you may get only a few shares, or none.
• Some brokers require a minimum account balance, and some may restrict you from future IPOs if you sell your shares within the first 30 days ("flipping").

2. On the first day of trading or later

This is how most individuals end up owning a new stock. Once the ticker starts trading, you can buy it like any other share with a regular order. The catch is price: popular IPOs often open far above the IPO price. SpaceX priced at $135 and opened at $150, then traded above $225 in its first week.

What the 2026 mega-IPOs taught investors

The pattern is familiar: first-day pops get the headlines, but plenty of IPOs fall below their offer price within months. Buying the hype on day one has historically been a coin flip at best.

Risks to understand before buying an IPO

• Little trading history. There is no record of how the stock behaves in a downturn.
• Lock-up expirations. Insiders usually can't sell for 90 to 180 days. When that window ends, a wave of new shares can push the price down. See our guide to the IPO lock-up period.
• Valuation. New companies are often priced for perfect growth. A small miss in the first earnings reports can cause a big drop.
• Concentration. A single stock is far riskier than a diversified fund.

A sensible approach

1. Read the S-1, or at least the summary, risk factors and financial pages.
2. Keep IPO money small, for example no more than 5% of your portfolio in individual stocks you would be comfortable seeing drop by half.
3. Consider waiting for the first two earnings reports and the end of the lock-up before buying.
4. Remember that index funds catch winners eventually. Large IPOs that succeed tend to enter major indexes like the S&P 500, so an index fund owns them without you picking.

Upcoming IPOs to watch

Anthropic, the AI company, filed confidentially in June 2026, and Bloomberg has reported it could list before Thanksgiving, though no public S-1 had been released as of mid-October. OpenAI's CEO has said its listing will not come until 2027. Dates and valuations in the IPO pipeline change often, so always check the company's public S-1 on the SEC's EDGAR site before acting on any report.

Frequently asked questions

Can I buy a stock before its IPO?

Not on a public exchange. Before the IPO, shares are held by insiders and private investors. Some platforms sell pre-IPO shares to accredited investors, but these are illiquid and risky, and the SEC warns about pre-IPO scams that promise access to famous companies. For most people, the first realistic chance is through a broker's IPO access program or on the first day of trading.

What is the difference between the IPO price and the opening price?

The IPO price is what the company and its bankers charge the investors who received shares in the offering. The opening price is the first trade on the exchange, set by supply and demand that morning. On a hot deal the gap can be large: SpaceX priced at $135 and opened at $150.

Do I need a lot of money to buy IPO stock?

No. Once a stock is trading, many brokers let you buy a single share or even a fraction of a share. IPO access programs sometimes have account minimums, and allocations are often just a few shares.

Are IPOs good long-term investments?

Some become huge winners, but research on decades of U.S. IPOs has found that, on average, newly public companies have trailed the broader market over the following years. That is why many investors either keep IPO bets small or wait and let index funds pick up the companies that succeed.

Sources

• SEC: Investing in an IPO
• Dealroom: Upcoming and recent IPOs (data as of October 14, 2026)
• SpaceX IPO and lockup schedule