The IPO Playbook

The IPO Playbook

SpaceX, Anthropic, OpenAI, and Stripe all have IPO rumors. The combined private market valuations run into the trillions and some of them will eventually be public.

Before any of them do, this is what the last 25 years say about the first 24 months for a large IPO.

The cohort is 56 US companies that went public since 2000 at $5 billion or more in market cap. SPACs are excluded. Each name is indexed from the day-1 open, the price you can actually transact at, not the offering price most investors do not get allocated to.

The median new IPO is down 12% two years in. The 25th percentile is down 54%, and only 44% of the cohort is above its day-1 open at month 24, which means a majority is below it.

There is a wide spread above the median too. Google, Peloton, and Reddit each tripled. Meta worked through a rough debut, then compounded. For every name that worked, there is a Coinbase, a Rivian, or an Affirm down 80% or more two years on.

Our approach with any new IPO is to wait. We do not buy in the first six months. After that window there is actual trading history, at least one earnings report, and usually the first lockup expiry, enough to assess whether the price reflects the business.

History does not tell us which side of the band the next batch lands on. It tells us the dispersion is real, and the buyer with six months of data has a better dataset than the buyer on day one.

Until next week,
Jacob

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