What Is an IPO
You've probably heard 'they say you make money subscribing to IPOs' at least once. Let's look at exactly what an IPO is, and what risks hide behind the dazzling first-day surge.
What is an IPO
An IPO (Initial Public Offering) is when a private company sells stock to the general public for the first time and lists on a securities market.
It's the moment when shares that only founders and early investors held are opened to the market so anyone can buy and sell them. Through this, the company raises large-scale funding, and early investors get a chance to cash out.
In this process, a securities firm (the underwriting syndicate) evaluates the company's value and sets the 'offering price,' and investors are allocated shares before listing through 'subscription.' In Korea this is called 'public-offering subscription.'
Lock-up: insiders can't sell right away
A concept you must know in an IPO is the 'lock-up.'
A lock-up is a contract that ties up insiders—founders, executives and employees, early investors—so they cannot sell their shares for a certain period after listing. It's a device to prevent the price from plunging as insiders dump shares the moment the stock lists.
The period is usually 180 days as a standard; for high-quality companies it can be as short as 90 days, or in special cases as long as 270–365 days. It may also be released in stages, such as 25% at 90 days and the rest at 180 days.
At the point when the lock-up is released, the volume that can come to market can suddenly increase 5–10x, so downward pressure on the price often arises around that time.
The lock-up expiration date can be checked in disclosures. When you wonder 'why is the price suddenly dropping?', lock-up expiration volume is sometimes the cause.
The first-day surge and the truth about 'ddasang'
IPO stocks often rise sharply above the offering price on the first day of listing. Academics call this 'IPO underpricing.'
Looking at U.S. IPO data research (Professor Jay Ritter), the average first-day return from 1980–2025 was about 19%. Especially in the hottest years, 2020 was about 40% and 2021 about 32%, far exceeding the average.
In Korea, when the opening price on the first day starts at double the offering price (double) and rises to the daily upper limit (limit-up), it's called 'ddasang.'
But a first-day surge does not mean long-term returns. Many stocks that debuted dazzlingly fell below their offering price over time, and research shows that the long-term performance of IPO stocks was often below the market average.
The average first-day return (19%) is an 'average' and a 'listing-day' figure. An individual stock can fall on the first day, and even if you subscribe, if your allocation is small, the return you actually pocket may not be large.
Things to remember when looking at an IPO
An IPO is 'a new company's debut,' so attention and excitement gather around it. That's all the more reason to view it coolly.
First, the seller (the company and the underwriting syndicate) has an incentive to set the offering price favorably for itself. The mere fact of 'listing' does not guarantee it's a good company.
Second, the share price in the early days of listing can be greatly shaken by lock-up expirations, the fading of expectations, and so on. Because of its short history, there's also little data to reference.
Third, from the perspective this service deals with—'if you buy good assets for a long time, how much would you have now?'—a just-listed company has no long-term data, making it hard to judge. It's important to build the habit of first checking a company's substance and risks over its buzz.
Preguntas frecuentes
Q. Is IPO subscription always a good deal?
No. It's true there's a history of average first-day rises, but that's only an average—an individual stock can fall from the first day. Popular stocks have high competition, so the volume actually allocated is small, and it's also common for the price after listing to fall below the offering price. 'Subscription = guaranteed profit' is not the case.
Q. If it's a 'ddasang,' should I just hold it long-term?
The first-day surge and long-term returns are separate. Research shows IPO stocks often underperformed the market average for several years after listing. In particular, when the lock-up is released and insider volume comes out, the price can be pressed down. It's hard to conclude long-term performance from the first-day result alone.
Páginas relacionadas
📋 Los resultados se basan en datos históricos; las rentabilidades pasadas no garantizan rentabilidades futuras.
📋 Este servicio se ofrece con fines educativos para ayudarte a entender la inversión, no como asesoramiento de inversión.