What is a US IPO? Meaning, Process & How It Differs from an Indian IPO

A US IPO is the moment a private company in America sells its shares to the public for the very first time, on exchanges like NYSE or NASDAQ. Once listed, anyone with a brokerage account can buy or sell those shares freely.

If you have applied for IPOs in India before, the idea is familiar. But the rules, the process, and especially who gets to buy shares at the IPO price are very different in the United States. This guide covers all of that, with a clear comparison along the way.

What is a US IPO? (Simple Definition with Example)

IPO stands for Initial Public Offering. When a company is private, its shares are held only by founders, employees, and early investors such as venture capitalists. An IPO is how that company invites the general public to become shareholders for the first time.

In the US, IPOs happen on two major stock exchanges:

• NYSE (New York Stock Exchange), where companies like Walmart and JPMorgan trade
• NASDAQ, where most big tech names such as Apple, Google, and Meta are listed

The company raises fresh capital from the public through this process, and investors get a stake in the business. That is the exchange on both sides.

How a US IPO Works: The 5-Step Process

Getting from a private company to a publicly listed one in the US involves five main stages. Each stage is noticeably different from what happens in an Indian IPO.

Step 1: Company Files S-1 Registration Statement with the SEC

Before a US company can go public, it must file a document called the S-1 with the SEC, which stands for Securities and Exchange Commission. The S-1 is the US equivalent of India's DRHP (Draft Red Herring Prospectus). It contains everything a potential investor needs to know: the company's financials, business model, risks, how it plans to use the money raised, and who the major shareholders are.

This document is publicly available for free on SEC EDGAR, a searchable database of all company filings. Anyone can read it before the IPO happens. Think of the S-1 as the company saying to the public: here is everything about us, decide if you want to invest.

Step 2: SEC Reviews the Filing (75 to 120 Days)

Once the S-1 is filed, the SEC reviews it carefully. This is not a rubber stamp. The SEC can send detailed comment letters asking the company to clarify or correct parts of its filing. The company must respond to every question in writing.

This process can last anywhere from 75 to 120 days and sometimes longer. Companies often go through two or three rounds of comments before the SEC is satisfied.

For comparison, SEBI's review of a DRHP in India typically takes around 30 days, though it can extend. The SEC process is noticeably longer and more detailed.

Step 3: Roadshow: Management Pitches to Institutional Investors

Once the SEC approves the filing, the company goes on a roadshow. This is a 7 to 10 day period where the company's top management, usually the CEO and CFO, travel to meet large institutional investors such as mutual funds, hedge funds, and pension funds.

The goal is to build demand and gauge how much these large investors are willing to pay.

Retail investors are not part of the roadshow. You cannot attend or submit a bid during this stage. The roadshow is strictly for institutions, and the feedback from it directly decides the final IPO price range.

Step 4: IPO Pricing: The Night Before Listing

After the roadshow, the investment banks managing the IPO, called underwriters, sit down with the company and decide the final IPO price. This usually happens the evening before the shares start trading.

The price is based on demand signals collected during the roadshow. If demand was strong, the price is typically set at or above the top of the initial range. If demand is weak, it gets cut.

Indian retail investors have no role here. You cannot bid at this stage the way you can in an Indian IPO through ASBA.

Step 5: Opening Auction on NASDAQ/NYSE (Listing Day)

On listing day, shares do not start trading the moment the exchange opens. There is a structured auction first.

On NASDAQ, this is called the Opening Cross. It runs for a minimum of 10 minutes, during which buy and sell orders are collected. At the end of the auction, NASDAQ calculates the price at which the maximum number of shares can be exchanged, and that becomes the opening price.

NYSE uses Designated Market Makers (DMMs) to run a similar process, ensuring a fair and orderly opening price before regular trading begins. Once the opening price is set, the stock trades freely throughout the day like any other listed share.

US IPO vs Indian IPO: 6 Key Differences Every Indian Investor Must Know

On the surface, a US IPO and an Indian IPO are the same concept: a company selling shares to the public for the first time. But the rules are quite different. Here is a side-by-side comparison.

1. Regulator: SEC (US) vs SEBI (India)

In India, SEBI regulates IPOs and ensures companies disclose all material information to protect investors. In the US, this role belongs to the SEC, established in 1934 in the aftermath of the 1929 market crash. 

The SEC requires companies to file detailed disclosures before going public and has the authority to halt or reject an IPO if the filing is incomplete or misleading.

Both regulators have the same core goal: fair markets and investor protection. But their rules, timelines, and processes are different.

2. Share Allocation:

This is the single biggest shock for most Indian investors discovering US IPOs for the first time.

In India, SEBI mandates that at least 35% of every IPO must be reserved for retail investors (those applying for up to Rs 2 lakh). This is a protected quota. Even if a large institution wants those shares, they cannot touch the retail portion.

In the US, there is no such rule. Roughly 80 to 90% of an IPO's shares go to large institutional investors like Fidelity, BlackRock, and Vanguard. Retail investors receive whatever is left, and even that depends on the underwriter's discretion.

3. No Lottery System in US IPOs

In India, when an IPO is oversubscribed in the retail category, SEBI mandates a computerised lottery to decide who gets shares. Every qualified retail applicant has an equal chance. 

The US has no such system. Underwriters decide who gets IPO allocations entirely at their discretion. Institutional investors with strong relationships with the underwriting banks tend to get priority. Retail investors with regular brokerage accounts rarely receive meaningful allocations.

As a practical result, if you want to invest in a US IPO as an Indian retail investor, you typically cannot get in at the IPO price..

4. The Lock-Up Period: A US-Specific 90 to 180 Day Restriction

When a US company goes public, insiders including founders, early employees, and venture capitalists are typically restricted from selling their shares for 90 to 180 days after listing. This is called the lock-up period.

The reasoning is straightforward: if everyone who held shares before the IPO sold immediately, the market would be flooded with supply and the price would likely fall sharply.

When the lock-up period expires, it is common to see the share price come under pressure as insiders begin selling. If you are investing in a recently listed US stock, always check when its lock-up period ends. It is a meaningful risk event.

5. Research Document: S-1 Filing (US) vs DRHP (India)

Before an IPO in either country, the company publishes a detailed disclosure document.

In the US, this is the S-1 filing, available on SEC EDGAR portal. In India, this is the DRHP, available on SEBI's website or the NSE and BSE portals.

Both documents cover the same ground: financials, business description, risk factors, and use of IPO proceeds. The S-1 is generally longer and more detailed, partly because SEC requirements are very specific about what must be disclosed.

If you are researching a US company before it lists, reading its S-1 is the right starting point.

6. Settlement and Listing Timeline: T+1 (US) vs T+3 (India)

In the US, once an IPO is priced, the shares list on the exchange the next trading day. Settlement happens on a T+1 basis, meaning trades are settled one business day after they are made.

In India, SEBI reduced the IPO listing timeline from T+6 to T+3 starting December 2023. Shares now list three working days after the IPO subscription closes, a significant improvement in speed.

The US timeline remains faster, but the gap has narrowed meaningfully.

Key US IPO Terminology You Need to Know

If you plan to track or invest in US IPOs, these five terms will come up repeatedly.

Why Do US IPOs Attract Indian Investors?

You might wonder why Indian investors follow US IPOs so closely, given that they usually cannot buy shares at the IPO price anyway. There are a few strong reasons.

• Access to global innovation: US markets are where companies like Google, Amazon, Tesla, and Meta first listed. Investing in such companies early, even a few days after the IPO, has historically offered significant long-term returns for investors who held on.
• Dollar appreciation: When you invest in US stocks, your returns are in US dollars. Over long periods, the rupee has weakened against the dollar, which means your returns in rupee terms tend to be higher than the raw stock performance would suggest.
• Portfolio diversification: Your Indian investments are tied to India's economic cycle. US stocks give you exposure to a completely different economy, currency, and set of companies. If Indian markets underperform, your US holdings can cushion the impact.
• Access to sectors not available on Indian exchanges: Some industries, like large-scale cloud infrastructure, electric vehicles at the scale of Tesla, or genomics, are simply not available on Indian exchanges at any meaningful scale. US IPOs give you early entry into these categories.