IPO 101: What It Is and Why It Matters for FinTech Companies

Going Public, or an IPO, is often seen as a company’s move into the big league. It’s the moment when a private business becomes a public one, and its shares can be bought by anyone. In the FinTech industry, where competition is particularly fierce, going public isn’t just a way to raise capital. It also serves as proof of a company’s maturity. Let’s take a closer look at what an IPO actually means and why it holds special importance for FinTech companies.

Initial Public Offering (IPO): What It Means and Why It Matters  

An IPO, or Initial Public Offering, is the process by which a private company offers its shares to the public for the first time. In practice, going public marks a company’s transition into the status of a public entity, which brings stricter requirements for financial reporting, corporate governance, and transparency.

One of the main objectives of an IPO is to raise capital. By listing shares on the open market, a company gains access to a much broader pool of financial resources than private investors or venture capital funds can provide. How that capital is used depends on the company’s strategy. In most cases, proceeds are directed toward scaling the business, developing new products, entering new markets, or reducing debt.

Another key objective is giving early investors an opportunity to partially or fully cash out, locking in returns. This is especially important in the venture capital ecosystem, where a successful IPO exit enhances a startup’s appeal for future funding rounds and signals its success to the broader market.

Beyond raising capital and providing exits for early investors, IPOs serve several other important purposes, including:

1. Establishing market valuation. The IPO process allows a company to set its market capitalization based on supply and demand from a broad pool of independent investors.
2. Improving asset liquidity. Once a company is public, its shares can be bought and sold quickly on exchanges at market prices. By contrast, in private deals, finding a counterparty can take considerable time, and prices are often negotiated individually.
3. Strengthening reputation. Public companies face strict disclosure requirements, which build trust among clients, partners, and creditors. At the same time, going public significantly boosts brand recognition.

Taken together, an IPO represents a crucial step in the institutionalization of a business. It validates the maturity of the company’s organizational structure, demonstrates compliance with high regulatory standards, and opens the door to long-term growth in the public markets.

How the IPO Process Works from a Technical Perspective

The process of going public through an IPO is a complex and multi-stage process shaped by both internal corporate rules and external regulations enforced by government authorities. The key stages usually include:

1. Decision and preparation. The board of directors makes the strategic decision to pursue an IPO. At this stage, the company forms a working group that typically includes lawyers, auditors, and corporate governance consultants. The company prepares its financial statements under international standards (IFRS or US GAAP) and conducts multi-year audits.
2. Selecting underwriters. To organize the offering, the company signs agreements with one or more investment banks that act as underwriters. Their role is to determine a fair price range for the shares, attract investors, and guarantee the purchase of any unsold stock.
3. Legal preparation. A comprehensive due diligence review is carried out, covering financial performance, asset legality, and potential risks. Using this information, the company prepares a prospectus, an official document that provides full details about the business, its financial position, capital structure, risks, and plans for the use of proceeds.
4. Marketing. Company executives and underwriters present the business to potential investors during so-called roadshows. These meetings help build demand for the shares and establish the final price range.
5. Pricing and listing. After the marketing campaign, underwriters set the offering price. The company’s shares then begin trading on the chosen exchange.

On the first day of trading, prices can be highly volatile, reflecting the balance between supply and demand. Afterward, a post-IPO stabilization period usually lasting between 30 and 90 days begins, during which underwriters may intervene to stabilize the stock price using established mechanisms.

It’s worth noting that traditional IPOs aren’t the only way to go public. Alternatives such as direct listings and reverse mergers also exist, and they deserve separate consideration. 

Direct Listing

Unlike an IPO, a direct listing doesn’t involve issuing new shares or raising fresh capital. Instead, existing shares held by early investors and employees are made available to the public. This approach reduces underwriting costs and minimizes shareholder dilution, but it also deprives the company of price stabilization support.

Two major FinTech direct listings illustrate the model well:

1. Coinbase went public on NASDAQ in 2021 under the ticker COIN. The company’s market capitalization reached $86 billion on its first day of trading, marking the first public debut of a major cryptocurrency company.
2. Wise, a FinTech company, completed its direct listing on the London Stock Exchange (LSE) in 2021 under the ticker WISE. At the time of listing, the company was valued at about £8 billion (roughly $11 billion), making it the largest direct listing in LSE history.

Direct listings tend to be used by companies with established brands and transparent financial practices. However, the model carries greater volatility risks and requires strong confidence in investor demand. 

Reverse Merger

A reverse merger uses a legal entity without operating activities, created by investors specifically to take a private company public. This vehicle is known as a special-purpose acquisition company, or SPAC.

The process typically unfolds in several stages. First, the SPAC conducts its own IPO to raise capital, which is placed in an escrow account and can be used only for the acquisition. After the IPO, the SPAC’s management usually has up to 24 months to identify a suitable private target company. Once a target is selected, SPAC shareholders vote on the transaction. If approved, the reverse merger takes place, and the private company automatically becomes public, bypassing the traditional IPO process. Investors in the SPAC can either keep their shares in the combined entity or sell them on the open market.

One of the most prominent FinTech examples is the public debut of Bakkt, a cryptocurrency platform owned by Intercontinental Exchange. Bakkt became public through a reverse merger with VPC Impact Acquisition Holdings at a deal valuation of $2.1 billion. 

Top 10 Biggest IPOs in FinTech History

It’s worth noting that FinTech is an extremely broad concept, encompassing any company that offers an alternative to traditional financial solutions. At the core of the industry is the delivery of financial services through innovative technologies. The challenge, of course, is that “innovation” is a moving target. What was considered groundbreaking yesterday is often seen as commonplace today.

Moreover, many of the world’s financial giants, such as Visa and Mastercard, also fit the definition of FinTech companies. At the time of their emergence, they introduced innovations that transformed the market, and even now, they continue to actively adopt and develop modern technologies. With that in mind, when we look at the largest IPOs in FinTech history by funds raised, the list includes the following: 

1. Visa. The company went public on the New York Stock Exchange (NYSE) on March 19, 2008, under the ticker V. The offering raised approximately $17.3 billion, making it the largest IPO in U.S. history at the time. The lead bookrunners included JPMorgan, Goldman Sachs, Bank of America, Citi, HSBC, Merrill Lynch, and UBS, among others.
2. Cielo (formerly VisaNet Brasil). The listing took place on the São Paulo Stock Exchange (B3) on June 29, 2009, under the ticker CIEL3. The offering raised about $4.3 billion. At the time, it was the largest IPO in Brazilian market history and the biggest worldwide in 2009.
3. Worldpay Group. The company went public on the London Stock Exchange (LSE) on October 13, 2015, under the ticker WPG. It was valued at £4.8 billion (about $7.4 billion), and the IPO raised £2.48 billion. In 2017, Worldpay was acquired by Vantiv for roughly $10.4 billion, and in 2019, Fidelity National Information Services (FIS) bought the company for about $35 billion, marking the largest deal in the payments industry at the time. 

Seven More FinTech Giants That Went Public in Record IPOs: 

IPOs are among the key mechanisms driving the development of the global FinTech industry. They give companies access to capital for scaling and help maintain market transparency standards. The successful listings of the industry’s largest players show that going public isn’t just a financial tool but also an important factor in building trust with clients, partners, and regulators. At the same time, for FinTech companies without strong brand recognition, an IPO provides a way to establish themselves as legitimate participants in the global financial market and supports their long-term growth.