With the highly anticipated SpaceX IPO upon us—and OpenAI and Anthropic likely not far behind—many investors are asking the same question:
"Should I buy it as soon as trading begins?"
My answer is simple:
Probably not.
That's not because these companies are bad businesses. In fact, they may become some of the most successful companies of the next decade. But history suggests that buying exciting IPOs on their first day of trading is often a poor investment strategy.
The Money Has Often Already Been Made
The biggest winners are frequently the venture capital firms, private equity investors, founders, and early employees who purchased shares years earlier at much lower valuations.
By the time the public gets its opportunity, much of the appreciation has already occurred. Retail investors are often buying excitement rather than value.
The "IPO Pop" Isn't Usually Available to You
People hear stories about IPOs soaring 20%, 40%, or even 100% on their first day and assume they'll participate in those gains.
Unfortunately, many of those profits accrue to investors who received allocations at the offering price—not to the average investor placing an order after trading begins. Academic research and historical data show that investors buying at the end of the first trading day have generally underperformed the broader market over subsequent years.
Great Companies Can Be Terrible Investments at the Wrong Price
Investing is not simply about finding great companies. It's about finding great companies at reasonable valuations.
Even the greatest business can produce disappointing returns if investors overpay. History is full of examples where expectations became so optimistic that years of outstanding business performance were already reflected in the stock price.
The company may succeed while the investment disappoints.
Excitement Creates Poor Decisions
IPO day combines nearly every behavioral bias investors face:
- Fear of missing out
- Media hype
- Social media enthusiasm
- Scarcity ("Get in before it's too late!")
- The belief that everyone else knows something you don't
These emotions encourage investors to abandon the discipline they normally apply to every other investment decision.
Patience Is a Competitive Advantage
Ironically, many of the best buying opportunities occur after the excitement fades.
Once the headlines disappear and analysts begin evaluating fundamentals rather than dreams, prices often become more rational. Recent research on large IPOs suggests that while they may outperform briefly after listing, much of that advantage erodes over time.
Maybe SpaceX will become one of the greatest companies ever built. Maybe OpenAI and Anthropic will transform entire industries.
I hope they do.
But successful investing isn't about owning every exciting company the moment it begins trading. It's about buying good businesses at sensible prices and allowing time—not excitement—to work in your favor.
Sometimes the smartest investment decision is simply to wait.