After-Market Performance

The price level performance of a newly issued stock after its IPO. There is no standard ending time period that is considered, but after-market performance begins on the first day of trading on the exchange. Typically after-market performance will be measured through the lock-up period, anywhere from three to nine months after the IPO date. This allows for the market to "digest" the insider shares that might be sold quickly after the lock-up period ends. By looking at the after-market performance of all IPOs over a certain time period (as in a calendar year), analysts and investment bankers can determine the overall market demand for new issues, and possibly move up or delay a schedule IPO as a result.

To the company management and employees, the after-market performance of the stock is vital. If the company can reach and sustain a higher market valuation than originally estimated by the underwriting syndicate in open market trading, equity funding will be much more affordable than other methods of raising capital. Investors should keep in mind that an IPO may only represents a small percentage of total shares outstanding (usually about 20%). The remaining bulk of shares can be used to raise capital down the road as the company looks to grow and enter new markets.