Valuation & Financial Outcomes:
What Founders Need to Know Before Going Public

PublicFinancial.com IPO Knowledge Hub Series


The most important—and misunderstood—part of going public is valuation. What is your company really worth in the public markets, and what determines that number?


This guide answers the valuation questions founders ask most when preparing for an IPO or direct listing.


Key Founder Questions: Valuation & Financial Outcomes

1️⃣ How will our IPO offer price be determined?

In a traditional IPO:

  • Your underwriters propose a price range based on financial performance, comparable public companies, and investor feedback during the roadshow.
  • The final offer price is set the night before trading begins, based on demand from institutional investors.

In other words, it's not just about your financials—it’s about market appetite and storytelling.

2️⃣ What kind of valuation can we expect from the public markets?

That depends on:

  • Revenue, growth, and margins.
  • Sector-specific valuation multiples.
  • Strength of the leadership team and governance.
  • Quality of disclosures and investor narrative.

Comparable company analysis (comps) is the starting point. But momentum, investor perception, and market timing also play a major role.

3️⃣ What happens if the IPO is underpriced?

Underpricing is common. If your stock “pops” 20–50% on day one:

  • It can look great publicly.
  • But it means you raised less capital than you could have.

Underwriters try to balance:

  • Satisfying investors.
  • Ensuring a successful debut.
  • Managing downside risk.

Too much underpricing, however, represents dilution left on the table.

4️⃣ What if the IPO is not well received?

If demand is weak:

  • You may need to lower the price.
  • The deal could be downsized or delayed.
  • A poor first-day performance can dampen momentum.

That’s why testing investor demand early and setting realistic expectations is critical.

5️⃣ How is the initial trading price determined in a direct listing?

In a direct listing:

  • No underwriters set the price.
  • The opening price is determined by a matching auction between buy and sell orders on the stock exchange.
  • Existing shareholders can sell immediately—there is no lock-up.

The risk: early volatility and unpredictability.

6️⃣ Could a direct listing yield a different valuation?

Yes. Direct listings are either priced based on the last private placement price or are rely entirely on market demand:

  • If your brand is strong and investor interest is high, it can outperform an IPO.
  • If demand is unclear, pricing may be less favorable than with underwriter-managed pricing.

The upside: no dilution and lower fees.

The downside: less control over pricing and initial demand generation.

7️⃣ How can we gauge investor demand ahead of time?

  • Conduct confidential investor meetings ("testing the waters") if you're eligible.
  • Use your roadshow or Investor Day to present the business case.
  • Ask advisors to conduct informal soundings with institutional investors.

This helps prevent surprises on pricing and demand.

8️⃣ How much should we plan to raise in an IPO?

Typical ranges:

  • Many companies raise 15–25% of total market cap.
  • Dilution for existing shareholders is often 15–30%, depending on how much is raised.

You’ll want to raise enough to support growth—but not so much that it dramatically reduces insider ownership.

9️⃣ Will existing shareholders sell shares in the IPO?

Yes, if you include a secondary component.

  • Founders and early investors may sell part of their holdings.
  • Most IPOs have a lock-up period (typically 180 days) that restricts insider sales.

In a direct listing, insiders can sell immediately—but are often encouraged to stagger sales to avoid flooding the market.

🔟 What will our ownership structure look like after an IPO?

Post-IPO:

  • Institutional investors will likely hold a large portion of your float.
  • Founders and insiders typically retain a significant stake, especially if the IPO is modest in size.
  • Your public float (shares available for trading) usually ranges from 10–25% of total shares outstanding.

This structure affects:

  • Liquidity.
  • Governance.
  • Analyst and investor interest.

Final Thought


Valuation is not a formula—it’s a negotiation with the market.

Going public requires balancing capital needs, investor appetite, and strategic positioning. The more prepared and aligned your company is, the better your valuation outcome.

Next Step: Get a Pre-IPO Valuation Strategy Review

Want a second opinion on how investors might value your company—and how to position for maximum outcome? Schedule a Valuation Strategy Call with PublicFinancial.com