Going Public in Wall Street: What is an IPO?

The crypto world is merging at a fast speed with the traditional market, especially with Wall Street. Coinbase was the first company to go public through an IPO, and now Circle, the issuer of USDC coin, has filed for an IPO. Let’s see why it is important and how it works.

An Initial Public Offering is the process of transitioning from private to public status for companies. In other words, going public allows everyone to be part of the company through the stock market. 

The primary goal of an IPO is to raise money to expand the business and to monetize part of the investment from the original shareholders. And being a public company provides transparency and credibility, which helps obtain better terms when seeking further funds in the future.

Companies often consider going public when they reach unicorn status, which is a valuation of 1 billion dollars.

The underwriters, often Banks, are involved in every aspect of the IPO, including documentation, filing, marketing, issuance. They are the ones who price the shares through a due diligence process. 

An IPO is an expensive process, as numerous SEC requirements must be fulfilled and they have to report earnings every quarter. Additionally, price fluctuation could distract the management, especially when they are compensated based on stock performance rather than the company’s real business.

In summary, going public is a big step for a company and for crypto companies it means stepping into the sanctuary of TradFi, namely Wall Street.