Often a Bust, Data Shows Most IPOs Fail to Match the Hype

Jakarta, CNBC Indonesia – A number of the world’s technology giants are expected to list on stock exchanges in the near future. Although their valuations run into trillions of US dollars and attract considerable investor attention, history shows that newly listed shares do not necessarily deliver long-term gains.

SpaceX’s stock market debut in June 2026 raised US$86 billion, or around Rp 1,548 trillion (US$1 = Rp 18,000), and pushed the rocket manufacturer’s valuation above US$2 trillion (Rp 36,000 trillion).

Yet its market capitalisation has shrunk by hundreds of billions of dollars, even before the company reported financial results that beat expectations on 4 August 2026.

SpaceX’s listing is merely the opening act.

Several other companies with eye-watering valuations could also float this year, including OpenAI and Anthropic, two artificial intelligence (AI) developers; Stripe, a payments processing firm; and Databricks, a data software company.

The sheer size of these firms’ valuations has captured the attention of Wall Street, the heart of American finance. Whether these shares will genuinely generate returns for investors remains an open question.

It is not hard to see why initial public offerings (IPOs) are so alluring to investors.

Buying shares in a newly listed company often feels like getting in before the value takes off, with the prospect of reaping substantial profits.

Bonnie Brown, an in-house massage therapist at Google who joined in 1999, received stock options that eventually made her a multimillionaire.

Meanwhile, David Choe, the artist hired to paint a mural at Facebook’s Palo Alto office in 2005, accepted shares as payment for his work. The value of those shares was later estimated to have reached hundreds of millions of dollars.

By the time a company lists on the stock market, most of the gains have usually already been captured.

Founders, employees and venture capital firms have typically held the company’s shares for years. The median age of companies going public in the United States is now around 12 years, up from roughly eight years in the 1980s.

When an IPO takes place, institutional investors such as pension funds are usually the first to get the chance to buy shares at the offer price. Retail investors come in later and often have to pay more for the privilege.

The historical track record is also less than encouraging. Shares of newly listed companies do often surge on their first day of trading.

In 2025, the average first-day price gain was around 30%.

After that, the euphoria tends to fade.

Data compiled by Jay Ritter, a professor at the University of Florida, shows that companies listed between 1980 and 2024 underperformed the broader market by about 21 percentage points in the three years following their IPO, equivalent to roughly 5.5 percentage points a year.

That average masks enormous variation. The Economist analysed the one-, three- and five-year share returns of more than 3,500 US companies that listed between 2010 and 2025. The results were extremely mixed.

A small number of companies managed to beat the market by hundreds of percentage points, while many others lagged by equally wide margins. Buying shares in a newly listed company is not so different from buying a lottery ticket.

Even so, the coming wave of mega-IPOs may perform better than the typical newly listed firm.

Jay Ritter’s data shows that technology companies listed between 1980 and 2024 underperformed the market by 5.1 percentage points in the three years after their IPO. However, firms with annual sales of at least US$100 million actually outperformed the market by 13.7 percentage points. The market’s enthusiasm for these mega-IPOs may not be entirely misplaced.