We’re on the precipice of the largest ever IPO. At least two others are likely to occur this year that will be larger than any others before 2026 as well. Like many, I’m excited to see private companies become available to public market investors and to see IPOs occurring is a sign of well-functioning capital markets. However, like any investment decisions we make at Root, we try to ground our decisions in the evidence and data then let that be the guide as we discuss investment opportunities with clients.
SpaceX is approaching things in a unique way, but I don’t think that should lead investors to throw out all the data and assume this one or time is different. The way humans react to exciting events is remarkably consistent.
Perhaps you have heard a story like this: a prominent company is going public. The stock pops 30% on its first day. Someone who was involved in the IPO is on CNBC smiling ear to ear, XYZ up 30% on its first day of trading. It feels like you missed a major opportunity.
But the following day, you forget about it and move on to other, more important things. You never stick around to hear about the 45% decline following the first day of trading, but the pattern is decades old.
The Research
Researchers have studied IPO performance for more than 50 years. The findings are remarkably consistent. First-day returns are large, and largely inaccessible. Long-term returns are not very appealing.
Jay Ritter, a finance professor at the University of Florida who has tracked U.S. IPOs since 1975, published updated data in May 2026 covering 9,343 offerings from 1980 to 2025. The numbers tell a clear story.
The average first-day return from 1980 to 2025 was 19%. The median was just 7%, meaning most IPOs pop far less than headlines suggest. Over the following three years, the average IPO underperformed the market by 20.5 percentage points, roughly 5.5% per year. And of all IPOs from 1975 to 2021, 38.5% lost more than half their value within three years of going public.
As an investor, if your time horizon is one day, you’re not really an investor at all. You are a trader. For investors, IPOs are not all that appealing.
Does Positioning Change?
We believe our clients are well-positioned to meet their goals and get the most out of life via an investment allocation built on evidence and an understanding of their situation. We build our portfolios around assets that we believe will work reliably for decades. IPOs introduce a trader mentality, along with concentration, speculation, and market timing. It’s hard to marry those ideas with consistency, patience, and diversification – which we know will really dictate investment success over a lifetime.
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CONSIDER
What is the difference between Retirement and Financial Independence?
Retirement = you’re done working
Financial Independence = you get up in the morning and whatever you’re doing, you are doing it because you want to. If that changes, you can walk away and be okay.
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Let’s get after it this week!
Brooks
Statistics in this post are drawn from Jay Ritter’s Updated Statistics on U.S. IPOs, University of Florida, May 2026, covering 9,343 U.S. operating company IPOs from 1980 to 2025. The examples provided are hypothetical and for illustrative purposes only. Investing involves risk, including the possible loss of principal. Past performance is not indicative of future results. The information presented should not be construed as investment advice or a recommendation to buy or sell any security or implement a particular strategy.
Advisory services are offered through Root Financial Partners, LLC, an SEC registered investment adviser.