Historical trends show large IPOs often underperform in their first year, with mixed returns for high-profile debuts.
SpaceX’s record-setting IPO raised $85.7 billion earlier this month, doubling the previous largest debut. The stock’s initial performance has drawn attention, but historical patterns suggest a rocky road ahead for investors.
Analysis of past large IPOs reveals mixed results, with three of the five biggest debuts experiencing volatility in their first year. Hyped offerings, in particular, have underperformed, often failing to sustain early gains. Academic research, including studies by Jay Ritter, indicates that while IPOs typically surge on day one, they tend to lag comparable companies over the following one to five years.
However, larger companies like SpaceX may defy this trend. Ritter’s data suggests big businesses show little difference in long-term performance compared to peers. A recent Truist study of 30 major IPOs found negative returns at both six and twelve months, underscoring the uncertainty ahead.