The IPO was meant for the VCs to cash out as all fundamentals were completely irrational, but seems like no one cares about cash flow and profitability anymore during QE times. Dumb money will keep being dumb I guess
The IPO featured less than 5% of shares as free float. So the investors are still in pretty deep with their hands tied until lock-up restrictions expire. The IPO was more of a quick, public financing round for SpaceX than an exit for VCs.
I think one thing to point out is "everyone" in this context is probably the broader market, but the stock holdings aren't distributed uniformly. A few large investors could actually be sophisticated and unload a fortune and the rest of the shareholders could still largely still ignore fundamentals and suffer large losses. The broad market can be ignorant and the stock can (and is) be down, both things can be true.
People cared after the IPO but initially in far less informed circles I constantly heard from lower sophisticated investors bragging about how they'd been allocated X shares like they were Pokemon trading cards they managed to snag. They weren't very sensitive to the price, only to brag to their friends they had snagged them. After the shiny wore off and no one cared about how cool they were, they sold them.
No this was anomalous for an IPO. People were limited to something like 10 shares that they had to pre-order like they were special order trading cards with an order cap as direct recipients of the initial shares.
Usually the public starts buying IPOs in open market operations on the secondary market, which removes some of the shiny factor.
As a scientific adventure, SpaceX is a worthy company full of awesome people. But the management and VCs is another story, as usual. To price it at a market cap of $1.8T, somewhere double that of Walmart is insane.
My understanding is that an ideally priced IPO should not move much from the opening price in the near term. If it pops it means they left money on the table. If it drops, then I am not sure what the implication is exactly?
Now I think SpaceX is massively overhyped, but is the share price returning to IPO opening not just a sign that the banks accurately estimated something?
Your bank will get a ton of orders from institutional investors of how many shares they want at a given price. You will have a preference as to which investors you want on your cap table. Almost all of those investors value your stock less than the "pop price" (which includes the investors you want on your cap table). So you'll need to target the IPO below the "pop price" so you get them on your cap table.
You're probably picking investors based on how likely they'll let you stay on the board / CEO and if you think they're just going to dump the stock during the IPO (which would be bad for it's price).
So (unlike the SpaceX IPO) you're going to sell relatively little shares to retail who will buy at any price which during the opening days will cause it to spike as the demand (in nominal dollars) per share is beyond the IPO price target.
> but is the share price returning to IPO opening not just a sign that the banks accurately estimated something?
Sure they estimated something. But there's a ton of different things that can be estimated.
What do you mean by this? The person you responded to never used the words "should" or "should not", and then you basically repeated what they said using more neutral words...
What is so controversial about saying that SpaceX seems overpriced?
IPOs are generally not a good investment, at least not relative to average market return:
> However, a year later, we see that the majority of companies are either outperforming or underperforming the market by more than 10%. We also see that more companies are underperforming than beating the index (the red bars stretch below the 50% line).
> That seems to indicate that for some companies, the initial IPO enthusiasm wanes or expected earnings are not met, and investors reprice the IPO to reflect the actual, slower growth of the company.
> Three years after their IPO, we calculate that almost two-thirds of IPOs are underperforming the market, with most (64%) more than 10% behind the market’s returns.
> 56% of IPOs bought at the offer price lost money after 3 years. That number rises to 57% after five years. The numbers are higher when bought at the first day closing price: 60% lost money after 3 and 5 years. Worse than a coin flip.
> Only 19% of IPOs doubled or more after three years and 22% after 5 years when bought at the offering price. The numbers were worse when bought at the closing price.
> Of course, the lottery-like returns were possible, but it amounted to about 0.4% of all IPOs after 3 years and 1% after five years.
Interview with a researcher that has looked at IPOs over the last few decades:
> We’ve previously compared IPOs to lotteries that are prone to inflated valuations and low returns. Today we welcome “Mr. IPO,” Professor Jay Ritter onto the show for a deeper dive into IPO performance, for his insights into SPACs, and to hear his research into why economic growth doesn’t correlate with stock returns. Early in the episode, Jay unpacks how long-term IPO returns perform against first-day trading. While exploring the role that venture capital plays in tech IPOs, Jay talks about why negative earnings don’t affect tech IPOs in the short-term before sharing how skewness factors tend to impact young companies. Reflecting on how IPOs are usually underpriced, Jay discusses how the interests of companies are not aligned with the interests of IPO underwriters. After looking into IPO allocation, Jay compares the 2020 ‘hot IPO market’ with the internet bubble of the late 90s. Later, we ask Jay about what special-purpose acquisition companies (SPACs) are and why they’ve exploded in recent years. His answers highlight their investing benefits, risks, and why SPACs might be a better option for companies than IPOs. We examine how SPACs have historically performed and then jump into our next topic; why economic growth isn’t a good indicator that a country is worth investing in. He touches on why returns don’t correlate with economic growth, the place of capital gains and dividend yields when investing abroad, and how innovations in an industry can lead to higher stock returns. We wrap up our conversation by asking Jay for his take on whether the stock market is efficient before hearing how he defines success in his life. Tune in to hear our incredible and informative talk with Jay Ritter.
Many IPO's have the same trajectory that SpaceX did - first going up steeply and then dropping steeply. So there's certainly money to be made if you get the timing right but that is always the challenge.
If the IPO can't find institutional buyers at the price and has to resort transferring the initial shares directly to the public, safe to assume they've hyped the public into being the bag holder. What SpaceX did is rare for a reason.
Typical IPO pattern. Hyped IPOs shoot up and then correct, some correct more than others. Traders take their profits. Nothing new here, just bigger headlines because it's a big name. The bigger the name, the bigger the hype.
The IPO was meant for the VCs to cash out as all fundamentals were completely irrational, but seems like no one cares about cash flow and profitability anymore during QE times. Dumb money will keep being dumb I guess
The IPO featured less than 5% of shares as free float. So the investors are still in pretty deep with their hands tied until lock-up restrictions expire. The IPO was more of a quick, public financing round for SpaceX than an exit for VCs.
If no one cared about cash flow and profitability wouldn't SpaceX stock go up instead of down?
I think one thing to point out is "everyone" in this context is probably the broader market, but the stock holdings aren't distributed uniformly. A few large investors could actually be sophisticated and unload a fortune and the rest of the shareholders could still largely still ignore fundamentals and suffer large losses. The broad market can be ignorant and the stock can (and is) be down, both things can be true.
People cared after the IPO but initially in far less informed circles I constantly heard from lower sophisticated investors bragging about how they'd been allocated X shares like they were Pokemon trading cards they managed to snag. They weren't very sensitive to the price, only to brag to their friends they had snagged them. After the shiny wore off and no one cared about how cool they were, they sold them.
That is to be expected with any high profile IPO.
No this was anomalous for an IPO. People were limited to something like 10 shares that they had to pre-order like they were special order trading cards with an order cap as direct recipients of the initial shares.
Usually the public starts buying IPOs in open market operations on the secondary market, which removes some of the shiny factor.
As a scientific adventure, SpaceX is a worthy company full of awesome people. But the management and VCs is another story, as usual. To price it at a market cap of $1.8T, somewhere double that of Walmart is insane.
My understanding is that an ideally priced IPO should not move much from the opening price in the near term. If it pops it means they left money on the table. If it drops, then I am not sure what the implication is exactly?
Now I think SpaceX is massively overhyped, but is the share price returning to IPO opening not just a sign that the banks accurately estimated something?
In general terms you want the stock to pop.
Your bank will get a ton of orders from institutional investors of how many shares they want at a given price. You will have a preference as to which investors you want on your cap table. Almost all of those investors value your stock less than the "pop price" (which includes the investors you want on your cap table). So you'll need to target the IPO below the "pop price" so you get them on your cap table.
You're probably picking investors based on how likely they'll let you stay on the board / CEO and if you think they're just going to dump the stock during the IPO (which would be bad for it's price).
So (unlike the SpaceX IPO) you're going to sell relatively little shares to retail who will buy at any price which during the opening days will cause it to spike as the demand (in nominal dollars) per share is beyond the IPO price target.
> but is the share price returning to IPO opening not just a sign that the banks accurately estimated something?
Sure they estimated something. But there's a ton of different things that can be estimated.
Many IPOs slide below the initial price. This isn't a SpaceX thing.
If the NASDAQ changes their inclusion rules to court SpaceX... it sort of does become all about SpaceX.
> an ideally priced IPO
Ideally priced from the perspective of pre-IPO investors.
This seems like an argument for outside investors not to buy IPO stock.
There is no should or should not.
Look at the financials and the price, and you as an individual get to determine if it's worth buying (or selling).
What do you mean by this? The person you responded to never used the words "should" or "should not", and then you basically repeated what they said using more neutral words...
What is so controversial about saying that SpaceX seems overpriced?
Thanks for the advice, bud.
>If it drops, then I am not sure what the implication is exactly?
Surely you understand it's inverse of an IPO that jumps after intro, right?
SpaceX is not seen by investors as worth its price. This is because it is not.
Mid-August there’s a shareholder unlock of 20%, we haven’t seen the dip yet.
Looks to still be over a trillion market cap.
shocking, who could have predicted that?
IPOs are generally not a good investment, at least not relative to average market return:
> However, a year later, we see that the majority of companies are either outperforming or underperforming the market by more than 10%. We also see that more companies are underperforming than beating the index (the red bars stretch below the 50% line).
> That seems to indicate that for some companies, the initial IPO enthusiasm wanes or expected earnings are not met, and investors reprice the IPO to reflect the actual, slower growth of the company.
> Three years after their IPO, we calculate that almost two-thirds of IPOs are underperforming the market, with most (64%) more than 10% behind the market’s returns.
* https://www.nasdaq.com/articles/what-happens-to-ipos-over-th...
> 56% of IPOs bought at the offer price lost money after 3 years. That number rises to 57% after five years. The numbers are higher when bought at the first day closing price: 60% lost money after 3 and 5 years. Worse than a coin flip.
> Only 19% of IPOs doubled or more after three years and 22% after 5 years when bought at the offering price. The numbers were worse when bought at the closing price.
> Of course, the lottery-like returns were possible, but it amounted to about 0.4% of all IPOs after 3 years and 1% after five years.
* https://novelinvestor.com/the-hype-and-hot-air-around-ipos/
Interview with a researcher that has looked at IPOs over the last few decades:
> We’ve previously compared IPOs to lotteries that are prone to inflated valuations and low returns. Today we welcome “Mr. IPO,” Professor Jay Ritter onto the show for a deeper dive into IPO performance, for his insights into SPACs, and to hear his research into why economic growth doesn’t correlate with stock returns. Early in the episode, Jay unpacks how long-term IPO returns perform against first-day trading. While exploring the role that venture capital plays in tech IPOs, Jay talks about why negative earnings don’t affect tech IPOs in the short-term before sharing how skewness factors tend to impact young companies. Reflecting on how IPOs are usually underpriced, Jay discusses how the interests of companies are not aligned with the interests of IPO underwriters. After looking into IPO allocation, Jay compares the 2020 ‘hot IPO market’ with the internet bubble of the late 90s. Later, we ask Jay about what special-purpose acquisition companies (SPACs) are and why they’ve exploded in recent years. His answers highlight their investing benefits, risks, and why SPACs might be a better option for companies than IPOs. We examine how SPACs have historically performed and then jump into our next topic; why economic growth isn’t a good indicator that a country is worth investing in. He touches on why returns don’t correlate with economic growth, the place of capital gains and dividend yields when investing abroad, and how innovations in an industry can lead to higher stock returns. We wrap up our conversation by asking Jay for his take on whether the stock market is efficient before hearing how he defines success in his life. Tune in to hear our incredible and informative talk with Jay Ritter.
* https://rationalreminder.ca/podcast/139
Picking individual winning stocks can be hard:
* https://en.wikipedia.org/wiki/A_Random_Walk_Down_Wall_Street
Many IPO's have the same trajectory that SpaceX did - first going up steeply and then dropping steeply. So there's certainly money to be made if you get the timing right but that is always the challenge.
If the IPO can't find institutional buyers at the price and has to resort transferring the initial shares directly to the public, safe to assume they've hyped the public into being the bag holder. What SpaceX did is rare for a reason.
Still 10x higher than any rational price.
And I had to scroll all the way down here to find a post that wasn't high octane copium.
Could be a great buying opportunity depending on your theory of investment.
This line of thinking could be applied to literally any company in the world, even to Spirit Airlines 5 minutes before it went out of business.
I’m really tempted to buy a chunk right now lol
Typical IPO pattern. Hyped IPOs shoot up and then correct, some correct more than others. Traders take their profits. Nothing new here, just bigger headlines because it's a big name. The bigger the name, the bigger the hype.
Not really, it got turbo charged to Nasdaq which involves some involuntary investments.
As reported in The Shovel: https://theshovel.com.au/2026/06/29/factory-that-makes-world...