economy
Will SpaceX's IPO soar or sputter? Past IPOs offer clues.
Previous large initial public offerings suggest SpaceX investors could be in for a bumpy ride after Elon Musk's rocket company goes public on Friday.
TL;DR
- Major IPOs historically exhibit volatility in the first 12 months, often experiencing significant drawdowns.
- While some IPOs, like Zoom, have performed exceptionally well, a Truist analysis found an average maximum loss of 55% in the first year for sizable tech IPOs.
- Jay Ritter's research indicates an average three-year market-adjusted return of -21% for investors who bought IPO shares at their closing price on the first day.
- SpaceX's IPO is expected to raise $75 billion, valuing the company at $1.77 trillion, making it the largest IPO ever.
- IPOs on average rise 19% on the first day of trading, but long-term returns are less certain and depend on substantial revenue growth and profitability.
- A larger-than-usual allocation of 30% of SpaceX IPO shares to retail investors could increase volatility.
- SpaceX's inclusion in major index funds like the Nasdaq-100 and Russell indices may provide some buying support for its shares.