A headline saying an IPO is worth hundreds of millions does not tell you how much cash the business receives. Start with two questions: who is selling the shares, and which costs have been deducted? The SEC investor bulletin explains that proceeds from selling shareholders go to those holders.
A fictional offering with three different totals
The figures below are entirely hypothetical. They are a calculation exercise, not the terms of an actual company offering.
Assume 20 million shares are sold at €20 each. The company issues 12 million new shares, while existing shareholders sell 8 million shares.
The gross base offering is 20 million × €20 = €400 million. The company's primary component is 12 million × €20 = €240 million. Existing shareholders sell 8 million × €20 = €160 million.
All three figures describe the same transaction. They answer different questions. A reader using €400 million as fresh company funding would overstate the issuer's gross proceeds by €160 million.
Deduct the right costs
Now assume the company pays €18 million in underwriting commissions and other offering costs. Its illustrative net proceeds are €240 million less €18 million, or €222 million.
Do not subtract company costs from the entire €400 million and describe the result as company cash. The €160 million seller component was never part of the company's primary proceeds. In a real transaction, check how expenses are allocated rather than assuming every participant pays the same proportion.
Check who supplies additional shares
Suppose an option permits the banks to buy another 3 million shares from existing holders at €20 each. Full exercise adds €60 million to their gross sales. Total gross placement volume rises to €460 million, while the company's gross primary proceeds remain €240 million.
If the additional shares instead come from the company, the financing calculation changes. Keep the base deal and any exercised option separate until the final source establishes the actual outcome.
Turn the figures into a research note
Record the offer price, primary share count, existing shareholder share count, costs and option supplier. Then read the planned use of the company's net proceeds. A large placement is not itself an explanation of how the business will use capital. The Deutsche Börse IPO guide provides further context on new shares and shareholder sales.
Use the prospectus reading guide to locate the underlying disclosures.
Frequently asked questions
Does the entire IPO offering value go to the company?
No. Proceeds from existing shareholders' sales go to those sellers. The company receives proceeds from the shares it sells, less its applicable costs.
Are net IPO proceeds a profit figure?
No. Net proceeds measure financing received after relevant offering costs. They are not operating revenue or profit.
Does an additional share option always raise more company capital?
No. It depends on who supplies the additional shares. An option covering shares from existing holders raises proceeds for those sellers.