Snapchat IPO

Snap just went public; here's how an IPO actually works

NYSE president: IPO is but a small milestone for Snap
NYSE president: IPO is but a small milestone for Snap

Snap, the parent company of Snapchat, started trading at $24 per share on the New York Stock Exchange Thursday, rising more than 40 percent from its pricing at the open.

An opening price of $24 puts the company's market capitalization at about $33 billion. Around 100 million shares — traded under the ticker symbol "SNAP" — changed hands in the first 30 minutes of Snap's public debut Thursday morning.

Here's an infographic provided by the New York Stock Exchange that explains how an IPO works.

An initial public offering, or IPO, usually takes three to four months to play out, starting with the decision to list on an exchange, up until the stock's first day of trading.

Why would a company want to go public in the first place? To make money. That money can then be used to expand business and grow operations.

A fundamental step in going public is when the company hires an investment bank, or banks, to handle the underwriting process. After the company and investment bank agree to an underwriting deal, they will put together a registration statement to be filed with the Securities and Exchange Commission.

Once that statement is approved, the SEC will work with the company to set a date for the IPO. The underwriter must then compile a prospectus, or all the financial information on the company.

To promote the IPO, the underwriter can take that prospectus and present it to investors. This is known as a company's roadshow.

By the time IPO day rolls around, the underwriter and company decide on the final price of the shares. This can depend on the success of the roadshow and current market conditions.

From there, happy trading.

Disclosure: NBCUniversal is an investor in Snap.