The mega IPO trap
A wave of blockbuster listings is coming — OpenAI, Anthropic and SpaceX among them. The liquidity the market will throw at these names is going to be huge. But the day of the IPO is very often a poor day to buy.
We have a number of major mega IPOs out in the coming months. The level of liquidity that is going to be brought up by the market is going to be enormous. But here I want to highlight that this can be a trap for investors. IPOs can be poor entry points for investing in these companies — and the history is surprisingly clear on that.
What happened to Facebook
When Facebook listed back in 2012, it came to market at $38 a share. Immediately upon listing, the shares opened around 11% above the offer price and peaked at about $45 — some 18.4% above the starting price. If you were caught up in the excitement on day one, that early pop felt like validation.
It wasn’t. They listed on 18 May 2012. By early September that year, the shares had dropped to around $17.50 — a return of minus 53.8% on the IPO price. At its lowest point that September, it took more than fourteen months for shareholders who bought at the offer price to simply get back to where they started.
Facebook is a good example: a brutal early drawdown wrapped around one of the greatest long-term winners the market has ever produced.
Today Meta trades north of $627 a share — over 1,500% above that $38 offer price. The company has been a phenomenal investment. The timing of buying on debut was not.
The Edward Jones study
Edward Jones analysed the 30 largest IPOs in the Russell 3000 over the past twenty years. On average, these shares gained around 24% from the offer price — which sounds great until you realise most ordinary investors never get the offer price. On average these companies underperformed the S&P 500 by roughly 15% during their first year of trading. You would, have done better simply owning the index.
Six months on: half of them were lower
I’ve pulled together the month-by-month performance of eleven major listings, measured against the IPO offer price, for the first six months after listing. The pattern is not “mega IPOs always collapse” — it’s more nuanced than that — but it is sobering.
| Company | Offer | Listed | M1 | M2 | M3 | M4 | M5 | M6 |
|---|---|---|---|---|---|---|---|---|
| Meta / Facebook | $38 | May-12 | −18% | −43% | −52% | −43% | −44% | −26% |
| Tesla | $17 | Jun-10 | +17% | +15% | +20% | +28% | +108% | +57% |
| Uber | $45 | May-19 | +3% | −6% | −28% | −32% | −30% | −34% |
| Lyft | $72 | Mar-19 | −17% | −20% | −9% | −15% | −32% | −43% |
| Rivian | $78 | Nov-21 | +33% | −16% | −13% | −36% | −61% | −60% |
| Snowflake | $120 | Sep-20 | +108% | +172% | +134% | +127% | +116% | +91% |
| Alibaba ADR | $68 | Sep-14 | +45% | +64% | +53% | +31% | +25% | +22% |
| General Motors | $33 | Nov-10 | +12% | +11% | +2% | −6% | −3% | −4% |
| Airbnb | $68 | Dec-20 | +170% | +203% | +176% | +154% | +106% | +125% |
| DoorDash | $102 | Dec-20 | +89% | +66% | +29% | +40% | +47% | +75% |
| Coinbase* | $250 | Apr-21 | −5% | +1% | −5% | +4% | −9% | +28% |
Returns vs IPO offer price, month-end closes. *Coinbase was a direct listing; measured against its $250 Nasdaq reference price.
Out of these eleven companies, five ended up lower in share price after six months — Meta, Uber, Lyft, Rivian and (marginally, against its reference price) Coinbase. In other words, in close to half the cases you’d have got a better price simply by not buying on the day of the IPO. In fairness, Tesla is a good counter-example: you’d have done very well buying Tesla shares in the months right after its IPO, and it never looked back. So it very much depends on the company.
The offer-price illusion
Here is the part that matters most, and it’s the bit the headline IPO numbers hide. The returns above are measured against the offer price — the price institutions and favoured clients pay the night before trading begins. Ordinary investors almost never get that price. They buy at the first-day close, after the pop. And measured from there, the picture changes completely.
| Company | Listed | Offer | First-day close | Current | vs offer | vs first-day close |
|---|---|---|---|---|---|---|
| Meta / Facebook | 2012 | $38 | $38.23 | $627.57 | +1,552% | +1,542% |
| Uber | 2019 | $45 | $41.57 | $72.21 | +60% | +74% |
| Lyft | 2019 | $72 | $78.29 | $14.12 | −80% | −82% |
| Rivian | 2021 | $78 | c.$100.73 | $18.12 | −77% | −82% |
| Snowflake | 2020 | $120 | $253.93 | $244.18 | +104% | −4% |
| Airbnb | 2020 | $68 | $144.71 | $133.72 | +97% | −8% |
| DoorDash | 2020 | $102 | $189.51 | $160.07 | +57% | −16% |
| Coinbase | 2021* | $250 | $328.28 | $164.13 | −34% | −50% |
| Alibaba ADR | 2014 | $68 | $93.89 | $125.95 | +85% | +34% |
| General Motors | 2010 | $33 | $34.19 | $83.22 | +152% | +143% |
Current prices to June 2026. *Coinbase direct listing, $250 reference price.
Look at Snowflake, Airbnb and DoorDash. Against the offer price they are up 104%, 97% and 57% — spectacular. But against the first-day close, the price an ordinary buyer could actually achieve, they are down 4%, 8% and 16%. All that headline gain accrued before the public could realistically get in. The institutional offer-price return and the real public-market return diverged sharply.
The deeper point: a great company is not the same thing as a great entry price. Lyft and Rivian were down around 80% from both the offer and the first-day close — classic failed-hype IPOs where day-one enthusiasm evaporated. Meta was the opposite, rewarding even first-day buyers over 1,500% — but only if they could stomach a 54% drawdown in the first four months and hold on for years. And remember, the very long-term record for IPOs as a group is actually rather good. The difficulty is surviving the entry.
Why this matters right now
Ultimately, we need to look at the fundamental values of these companies to decide whether they’re worth investing in at this stage. That is difficult with a newly listed company — there is little public-market history, the float is small, lock-ups distort supply, and the operating record is thin.
But I’ll throw in an extra factor with the mega IPOs that are coming. There is a heady desire right now not to miss out on the potential of AI, and to get in on the returns from some of these major listings. That fear-of-missing-out is precisely the fuel that drives day-one prices to levels fundamentals can’t support.
My personal take on the AI listings: I would be quite worried about initial prices in the immediate aftermath of these companies listing. The level of general enthusiasm might cause the price to spike significantly. So at the very least, keeping exposure relatively limited on some of these might make a lot of sense — let the lock-ups expire, let a few quarters of public results arrive, and let the price find a level you can actually assess against fundamentals.
None of this is a prediction that the next wave will collapse. Tesla, Snowflake, Airbnb, Alibaba and others show that early winners do exist. It is simply a reminder that the IPO date carries a structural disadvantage for the ordinary investor, that the offer-price headline flatters the reality, and that the cost of patience — waiting for a clearer picture — is usually far lower than the cost of buying into the hype and being wrong.
Sources & method. Six-month returns measured against IPO offer price (month-end closes); Coinbase measured against its $250 Nasdaq reference price as a direct listing. Offer prices from Reuters/company reports; monthly closes from price-history data. Edward Jones / FactSet study of the 30 largest Russell 3000 IPOs over 20 years. Current prices to June 2026. This article reflects my personal opinions and is not investment advice. I may hold positions in companies mentioned. Always do your own research.