What Is an IPO? How Initial Public Offerings Work

An IPO (Initial Public Offering) is the process through which a company offers its shares to public investors for the first time. An IPO can include newly issued shares that raise capital for the company, shares sold by existing shareholders, or a combination of both. Investors who receive and hold the shares become shareholders of the company.

For investors, an IPO is more than a first trading-day event. The process begins before listing and may include corporate preparation, audited financial statements, regulatory applications, a prospectus, valuation and pricing work, the sale or book-building period, allocation and finally trading on the stock exchange.

To follow current offerings in Türkiye, visit the IPO calendar. If you want to understand the participation process, see our how to buy an IPO guide.

Note: This content is provided for general informational purposes and does not constitute investment advice. Investors should review the prospectus, valuation or price determination materials, company financials and current official disclosures before making an investment decision.

What Does IPO Mean?

IPO stands for Initial Public Offering. It describes the first time a company offers its shares to public investors. After the required offering and listing processes are completed, the shares may begin trading on a stock exchange.

Buying shares in an IPO means acquiring an ownership interest in the company. However, an IPO does not automatically mean that all of the money raised goes into the company. The destination of the proceeds depends on whether the offering includes newly issued shares, existing shareholder sales or both.

Why Do Companies Go Public?

Companies may pursue an IPO for several strategic reasons. The exact objectives differ from one company and transaction to another.

• Raise new capital: If the IPO includes a capital increase or primary issuance, the company can receive new funds for expansion, investment, working capital or debt reduction.
• Create liquidity for existing shareholders: Founders, private equity investors or other shareholders may sell part of their holdings in the offering.
• Strengthen the capital structure: New equity can change the company's financing mix and balance-sheet structure.
• Increase visibility: A stock-exchange listing can make a company more visible to investors, customers, employees and business partners.
• Support institutional development: Public companies operate under ongoing financial reporting, disclosure and governance requirements.
• Access capital markets over time: A public listing may create additional financing options in the future, subject to applicable rules and market conditions.

None of these factors alone makes an IPO attractive as an investment. Investors should examine why the company is going public and how the transaction changes the company's financial and ownership structure.

Primary Shares vs. Existing Shareholder Sales

One of the most important IPO concepts is the difference between newly issued shares and shares sold by existing shareholders. This determines where the offering proceeds go.

IPO Structure	What Happens?	Who Receives the Proceeds?	Why It Matters
New shares / capital increase	The company issues new shares.	The company receives the proceeds from the newly issued shares.	Investors should examine how the company plans to use the new capital.
Existing shareholder sale	Current shareholders sell part of their existing holdings.	The selling shareholders receive the sale proceeds.	The transaction does not create the same new cash inflow for the company.
Combination	The company issues new shares and existing shareholders also sell shares.	Part goes to the company and part to selling shareholders.	Investors should separate the total offering size from the amount that actually enters the company.

Simple Example: Where Do IPO Proceeds Go?

Assume a hypothetical company completes a TRY 100 million IPO in Türkiye. Suppose TRY 60 million comes from newly issued shares and TRY 40 million comes from existing shareholder sales.

Part of the Offering	Example Amount	Recipient of Proceeds
New shares	TRY 60 million	The company
Existing shareholder sale	TRY 40 million	The selling shareholders
Total IPO	TRY 100 million	TRY 60 million company / TRY 40 million selling shareholders

This simplified example shows why investors should not assume that the total IPO size is equal to the amount of new funding received by the company. The exact structure should always be checked in the prospectus and official offering documents.

How Does the IPO Process Work?

The details vary across countries and transactions, but an IPO typically involves several stages before the first trading day.

1. Decision and preparation: The company decides to pursue a public offering and begins internal corporate, financial and legal preparation.
2. Advisers and intermediaries: The company works with authorized investment banks, brokerage firms, auditors, legal advisers and other professionals as required.
3. Financial and corporate readiness: Financial statements are prepared and audited as required, and corporate documents may need to be aligned with applicable capital-markets rules.
4. Regulatory and exchange applications: The company submits the relevant applications to the regulator and stock exchange.
5. Prospectus and disclosures: The company prepares detailed disclosure documents covering the business, financials, risks, ownership and offering terms.
6. Valuation and offer price: Valuation work is performed and the terms of the offering are determined and disclosed.
7. Book building or sale: Investors submit orders or participate through the applicable sale method.
8. Allocation and settlement: Shares are allocated according to the offering rules and the transaction is completed.
9. Listing and trading: Once the required steps are completed, the shares begin trading on the relevant stock exchange market.

For a closer look at investor orders and demand collection, read what is IPO book building.

How Is an IPO Price Determined?

IPO pricing is influenced by factors such as the company's financial performance, business model, sector, growth expectations, comparable companies, market conditions and the valuation methods used by the advisers involved in the offering.

In Türkiye, Borsa İstanbul states that the offer price is determined by the brokerage or investment house involved in the IPO process and that neither Borsa İstanbul nor the Capital Markets Board of Türkiye sets the offer price. This is an important distinction for investors: regulatory approval should not be interpreted as an official statement that an IPO is cheap or fairly valued.

Investors should review the assumptions behind the offering price, not only the headline price itself. Valuation multiples, comparable-company selections, forecasts, discounts and the company's current financial performance can materially affect the analysis.

What Is IPO Book Building?

Book building is a process in which investor demand for the offered shares is collected during an announced period. Depending on the offering structure, investors may submit orders at a fixed price, within a price range or under other methods permitted by the applicable framework.

If demand exceeds the number of shares available to a particular investor group, investors may receive fewer shares than they requested. The final allocation depends on the offering's allocation rules and demand.

For details on this process, see our IPO book-building guide.

How Does IPO Allocation Work?

IPO allocation determines how the available shares are distributed among investors. The method differs by market and transaction. In Türkiye, offering documents may specify allocations among investor groups and the principles used to distribute shares when demand exceeds supply.

For retail investors, the number of shares received can depend on the size of the retail allocation, the number of applicants, total demand and the distribution method. To understand common allocation concepts used in Turkish IPOs, see equal allocation and proportional allocation.

What Is an IPO Prospectus?

An IPO prospectus is one of the main disclosure documents investors use to understand the company and the offering. It can include information about the business, financial statements, risk factors, ownership, use of proceeds, shares being offered and important transaction terms.

A prospectus can be long, but it should not be treated as a formality. Investors can use it to answer practical questions such as:

• What does the company actually do?
• How has revenue, profitability, debt and cash flow developed?
• What are the main business and financial risks?
• How much of the IPO consists of new shares versus existing shareholder sales?
• How will the company use any new proceeds it receives?
• What are the offering and allocation terms?

For a practical reading order and checklist, visit what is an IPO prospectus.

Does Regulatory Approval Mean an IPO Is Safe?

No regulatory approval should be treated as a guarantee of investment performance. In Türkiye, the CMB/SPK reviews the prospectus within its disclosure framework, including whether the information is consistent, understandable and complete according to the applicable prospectus standards.

That review is not the same as guaranteeing that the company's shares will rise after listing, that the valuation is inexpensive or that the company has no risks. Investors remain responsible for evaluating the company, offering terms and risks.

How Do IPOs Work in Türkiye?

Türkiye has its own regulatory and market infrastructure for public offerings. Three institutions or platforms are especially important for investors to understand:

Institution / Platform	Role in the IPO Ecosystem
Capital Markets Board of Türkiye (CMB / SPK)	The capital-markets regulator. Prospectuses for securities offered to the public or admitted to exchange trading are subject to the applicable CMB approval framework.
Borsa İstanbul	The exchange where eligible company shares may be listed and traded after the required application and approval processes.
Public Disclosure Platform (KAP / PDP)	A central platform through which listed companies and market participants publish official disclosures and documents.

Borsa İstanbul describes three basic public-offering structures: sale of existing shares, capital increase through new shares, and use of both methods together. It also describes sale methods including book building, sale on the Exchange and, under the relevant framework, sale without book building.

This Türkiye-specific structure is important for international investors because global IPO terminology does not always map perfectly to local practices. Investors should use the official prospectus and transaction documents for the exact structure of each Turkish IPO.

What Should Investors Check Before Buying an IPO?

Check	Question to Ask	Why It Matters
Business model	How does the company make money?	A clear understanding of the business is the starting point for investment analysis.
Financials	How are revenue, profit, debt and cash flow trending?	Helps identify financial strength, deterioration and funding needs.
IPO structure	New shares, existing shareholder sale or both?	Shows who receives the proceeds.
Use of proceeds	How will the company use the new capital it receives?	Connects the IPO to the company's growth, investment or debt strategy.
Valuation	Which methods and assumptions support the offer price?	An attractive company can still be an unattractive investment at an excessive price.
Risk factors	What could materially hurt the company or the investment case?	Prevents the analysis from focusing only on upside scenarios.
Allocation	How many shares are available to retail or other investor groups?	Can affect how much of an oversubscribed IPO an investor actually receives.
Official documents	Have the prospectus and current official disclosures been reviewed?	Helps base the decision on verifiable information rather than rumors.

What Are the Advantages of an IPO for a Company?

• Potential access to new equity capital when new shares are issued.
• Funding for expansion, investment, acquisitions, working capital or debt reduction.
• Potential liquidity opportunities for existing shareholders over time.
• Greater visibility among investors and business stakeholders.
• More formal reporting, disclosure and governance processes.

What Are the Disadvantages of Going Public?

• IPO preparation can involve significant advisory, legal, audit and intermediary costs.
• Public companies face continuing reporting and disclosure obligations.
• Founders or existing owners may be diluted or reduce their ownership percentages.
• Management operates under greater public and investor scrutiny.
• Share-price volatility can affect market perception of the company.

Are IPOs Risky for Investors?

Yes. IPO shares can trade above or below the offering price after listing. Risks may include an aggressive valuation, weak financial performance, changing sector conditions, market volatility, limited operating history in some companies, uncertainty around forecasts and shifts in investor demand.

High demand during the offering does not guarantee strong long-term performance. Likewise, a strong first trading day does not by itself establish that the company is a good long-term investment. Investors should separate short-term trading expectations from the underlying business and valuation analysis.

What Happens After an IPO?

After the IPO is completed and the shares begin trading, the market price changes according to buy and sell orders, company developments and broader market conditions. The IPO price is only the initial offer price; it is not a permanent reference price.

Public companies also continue to publish financial reports and material disclosures under the applicable market framework. Investors should therefore continue following the company's results, strategy, risks and official announcements after listing.

IPO vs. Book Building vs. Listing: What Is the Difference?

Term	Meaning
IPO	The overall first public offering process through which a company offers shares to public investors.
Book building	The period or process in which investor demand is collected under the offering terms.
Allocation	The distribution of available IPO shares among investors according to the offering rules.
Listing / first trading day	The stage when the shares begin trading on the stock exchange after the offering process is completed.

How Can Investors Follow IPOs in Türkiye?

Halkaarz.info provides a dedicated IPO calendar for current offerings and key dates in Türkiye. Companies that may come to market in the future can be followed through the expected IPOs page.

For each transaction, investors should still verify the latest details in official documents and disclosures because dates, offering terms and other transaction information may change.

Frequently Asked Questions

What is an IPO in simple terms?

An IPO is the first time a company offers its shares to public investors. Investors who acquire the shares become shareholders of the company.

What does IPO stand for?

IPO stands for Initial Public Offering.

Does all IPO money go to the company?

No. Proceeds from newly issued shares go to the company, while proceeds from shares sold by existing shareholders go to those selling shareholders. An IPO can include both.

What is the difference between an IPO and a direct stock-market purchase?

In an IPO, investors participate in the initial public sale of shares under the offering terms. After listing, investors buy and sell already-listed shares in the secondary market.

Who sets the IPO price in Türkiye?

According to Borsa İstanbul's IPO preparation information, the offer price is determined by the brokerage or investment house involved in the process; neither Borsa İstanbul nor the CMB sets the offer price.

Does CMB/SPK approval guarantee that a Turkish IPO is safe?

No. Prospectus approval is part of the regulatory disclosure framework. It should not be interpreted as a guarantee of returns, a statement that the shares are cheap or proof that the company has no investment risks.

How many IPO shares will I receive?

The final amount depends on the shares allocated to your investor group, total demand, the number of applicants and the distribution method. In an oversubscribed IPO, investors may receive fewer shares than requested.

Can an IPO fall below its offer price?

Yes. Once trading begins, the market price can move above or below the IPO price depending on company performance, valuation, investor demand and broader market conditions.

What should I read before investing in an IPO?

The prospectus is a key starting point. Investors should also review company financials, risk factors, use of proceeds, valuation or price determination materials and current official disclosures.

What is a prospectus?

A prospectus is a disclosure document containing important information about the company, its financial condition, risks, ownership and the terms of the public offering.

What is IPO book building?

Book building is the process of collecting investor orders during an announced offering period. The exact rules and pricing method depend on the offering framework.

What is a Turkish IPO?

A Turkish IPO generally refers to a company offering shares to the public within Türkiye's capital-markets framework and, where applicable, seeking trading on Borsa İstanbul. The specific transaction is governed by the official offering documents and applicable CMB and Borsa İstanbul rules.

Official Sources

This guide was prepared with reference to official information on public offerings, IPO methods, sale methods, prospectus approval and listing preparation published by Borsa İstanbul and the Capital Markets Board of Türkiye. Investors should use current official documents for transaction-specific details.

Conclusion: Understand the Structure, Not Just the First Trading Day

An IPO gives public investors an opportunity to become shareholders in a company at the start of its public-market life. But the quality of an IPO cannot be judged only by expected allocation, oversubscription or first-day price performance.

Investors should understand whether the offering consists of new shares, existing shareholder sales or both; how any new proceeds will be used; how the company is valued; what the financial statements show; and which risks are disclosed. For current offerings in Türkiye, use the IPO calendar, and for a deeper review of official offering documents see the IPO prospectus guide.

This content is provided for general informational purposes and does not constitute investment advice. Investors should review official offering documents, company financials and current disclosures before participating in an IPO.