RESEARCH · 4 MIN READ
How to analyse an IPO
Do not begin with GMP. Begin with the company, the offer document and the price being asked.
1. Understand the business
Write down what the company sells, who pays it and why customers choose it. If the revenue model is difficult to explain in two sentences, study it further before considering the issue.
2. Check financial quality
Review three years of revenue, profit, cash flow, debt and margins. Profit rising while operating cash flow stays weak deserves an explanation.
3. Read the use of proceeds
Fresh issue money may fund expansion, repay debt or support working capital. An offer for sale sends money to existing shareholders, not to the company.
4. Compare the valuation
Compare the IPO price-to-earnings ratio, growth, margins and return ratios with genuinely similar listed peers. A good company can still be an expensive IPO.
5. Finish with risks
Read company-specific risks, litigation, customer concentration and related-party transactions. Decide what could break the investment case—not only what could make it succeed.
Reviewed for clarity · 2026-11-03