Elon Musk’s SpaceX filed confidentially for a record-breaking U.S. listing, a person familiar with the matter told Reuters on Wednesday, a multi-step process IPO hopefuls typically must navigate before their shares begin trading.

From filing to market debut, the timeline of an IPO can be three to six months, depending on the pace of regulatory review and market conditions.

The US Securities and Exchange Commission (SEC) allows companies to file confidentially, giving issuers the freedom to decide whether to submit initial drafts privately or make them public from the start.

Initial filing

In the months leading up to an IPO, ⁠companies hire a group of banks, called underwriters, to run the process, help gauge demand and set expectations for the potential size of the offering.

Companies then enter a quiet period when public communications are restricted so as not to influence investor demand before pricing.

Banks prepare prospectuses, usually filed confidentially by high-profile issuers, that allow the SEC to review them privately for any concerns or gaps while keeping sensitive details such as financials, competition, and other information out of public view.

This is followed by the public filing of a registration statement, including a prospectus, a process that can take weeks to months, known as an S-1 for US-incorporated companies and an F-1 for foreign issuers seeking a US listing.

It is at this stage that potential investors take a detailed look at the company’s business, risk factors, key supporters and shareholders, as well as its chosen exchange and ticker.

Roadshow launch and marketing

When the offering is sized, an amended registration statement called an S-1/A or F-1/A is filed, disclosing the number of shares to be offered and the indicative price range.

The increase refers to the size of the offer and is calculated by multiplying the number of shares offered by the company or its existing investors by the high end of the indicated price range. At this stage the potential valuation of the company is revealed in the IPO.

This is followed by a road show, where company executives and underwriters select investors and test demand.

If initial demand is strong, some issuers file a second S-1/A or F-1/A to increase the number of shares on offer or increase the price range.

Conversely, if demand is weak, issuers may reduce the number of shares or reduce the price range.

Pricing and Market Debut

Once the underwriters close the books and determine the final price of the shares, the offer price is calculated, marking the end of the sale process.

Companies can adjust the size of the offering, sell more or fewer shares than initially planned, and price above or below the proposed range, depending on demand.

Underwriters then allocate shares to institutional investors based on demand and relationships, often favoring long-term holders after pricing.

They can also exercise a so-called greenshoe option, which allows them to sell additional shares to meet additional demand and support the stock in early trading.

Some offerings involve grassroots investors, typically large institutional buyers who commit to purchase shares prior to listing, providing early demand and confidence in the issue.

Shares begin trading on the exchange the day after pricing, with a debut determined by how the opening price compares to the IPO price, indicating the strength of investor demand.

IPO watchers closely track a stock’s performance in the weeks following its debut, not just on the first day.

Company insiders are generally subject to a lock-up period of 90 days to 180 days, which prohibits them from selling their shares.