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The hype machine is running at full speed… what Jay Ritter’s 45-year database actually shows… and the backdoor into AI’s biggest winners before Wall Street reprices them…
Don’t you do it – don’t you buy the SpaceX (SPCX) IPO tomorrow.
Or, if you insist, at least do so with your eyes open.
The hype machine surrounding this IPO is unlike anything Wall Street has produced in years. Financial media is wall-to-wall with breathless coverage. And investor demand has reportedly topped $250 billion – more than three times the size of the offering itself.
Analysts are projecting valuations that would make SpaceX worth more than every company on earth except a handful.
It’s a simple and seductive narrative: this is a once-in-a-generation company, and if you don’t get in at the open, you’ll regret it forever.
Maybe.
But before you place that order tomorrow morning, meet Jay Ritter.
He’s a professor at the University of Florida and, without exaggeration, the world’s foremost academic authority on IPOs. His database covers 45 years of U.S. IPO history – more than 9,300 offerings.
Ritter produces the source material on which virtually every serious IPO analysis on Wall Street is built. Goldman cites it. JPMorgan cites it. The SEC cites it.
Tomorrow, I’ll publish a deep-dive on the upcoming spate of IPOs in my latest issue of – my separate weekly investment letter – going through Ritter’s data in greater detail. What follows in today’s Digest is an abbreviated version of what I found.
And I’ll be direct: it should give any retail investor serious pause before chasing tomorrow’s open, or any of the slew of high-profile IPOs on the way.
The first-day pop is not for you
When SpaceX starts trading tomorrow, financial media will lead with one number: the first-day return. And that number will almost certainly be large.
A first-day pop is a durable feature of IPO markets – Ritter’s data shows the average IPO from 1980 through 2025 closed its first trading day 19% above the offer price.
The problem is that you – Mr. or Ms. Average Investor – are highly unlikely to get the offer price.
That price goes to institutional investors – the mutual funds, hedge funds, and pension managers that the underwriting banks cultivate as clients. By the time the typical retail investor can buy SpaceX shares, the stock will already be trading at that inflated first-day price.
Now, SpaceX is reportedly trying a workaround here. It has reserved 30% of its total IPO shares specifically for retail investors. However, the deadline to request the $135 shares passed yesterday. If you didn’t place an order, you’ll have to wait until the stock begins trading on the Nasdaq.
Plus, the IPO is currently “oversubscribed,” meaning investors have requested up to fourtimes more shares than SpaceX has available. Because of this, brokerages cannot guarantee full orders.
So, once again, odds are that if you’re the average investor, you’re not buying at the offer price. You’re buying after the pop has already happened.
Which means that 19% Day-1 gain?
It was never yours.
So, who gets that?
Tomorrow brings a massive wealth transfer – from retail buyers to the insiders and institutions who were there first.
Ritter quantifies just one piece of this: since 1980, $250 billion has been left on the table through first-day underpricing alone – money that flowed to institutional allocatees who got shares at the offer price while retail buyers could only buy in after the pop.
There’s a phrase that circulates in certain financial circles: instead of “Initial Public Offering,” IPO stands for “It’s Probably Overpriced.”
But there’s a darker version I’ve referenced before in the Digest: “Introductory Public Offloading.”
In other words, IPO day is when insiders and early backers use the public markets to hand off risk to new buyers at peak valuations.
After 45 years of Ritter’s data, I’m not sure either label is wrong.
What happens after the pop
While most IPO coverage is obsessed with day one, Ritter spent decades measuring what happens over the three to five years that follow. The findings should be required reading for any retail investor thinking about buying into the coming IPO wave.
The bottom line: IPO buyers – purchasing at the day-one closing price, not the offer price – underperform the market by an average of 20.5% over the following three years.
That works out to roughly 5.5% per year of underperformance versus simply owning an index fund.
Think about that for a moment…
After all the excitement, all the media coverage, all the analyst upgrades – the average person who buys an IPO on or shortly after its debut would have been better off, by a meaningful margin, just buying the S&P 500.
But see for yourself…
The chart below dates to 2013. The red line is the S&P 500. The blue line is a basket of IPOs.
The performance differential – 428% for the S&P versus 155% for the IPO basket – is the cost of chasing new issues instead of owning the index.
Source: Max Martone / Morningstar
The numbers get even worse when you break the data down by profitability.
Profitable companies going public already underperform the market by 13% over three years – a poor outcome on its own.
But what happens when an unprofitable company goes public?
SpaceX, OpenAI, and Anthropic are all going public without established profitability, while burning capital at a scale that would draw serious scrutiny in any other context (to be clear, SpaceX’s Starlink division is highly profitable, but SpaceX as a whole is losing billions of dollars).
Ritter’s data shows that unprofitable companies return -30.7% on a market-adjusted basis over the same time frame. That’s nearly two-and-a-half times worse.
Goldman’s own track record says: be careful
Ritter’s data tracks long-run IPO performance by lead underwriter – the bank whose name goes on the top left of the prospectus, whose job is to price the deal and generate investor enthusiasm.
Goldman Sachs is the lead underwriter on the SpaceX IPO. JPMorgan is involved as well.
So, how have Goldman-led IPOs performed for the investors who bought them?
From 2012 through 2021, Goldman led 272 IPOs. Those deals produced an average first-day return of 27.6% – a great day for institutional allocatees.
But for investors who bought at that first-day closing price and held for three years, the market-adjusted return was negative 25.6%.
To be clear, that’s not an absolute return. The investor didn’t lose 25.6%. This is the degree of underperformance relative to the market.
After all the excitement, all the media coverage, and the risk of buying a single unproven company, investors would still have been better off, by a wide margin, just owning the index.
JPMorgan’s track record over the same window: negative 10.5% on a market-adjusted basis.
The Hall of Fame of first-day doubles
Ritter tracks every IPO that doubled on its first day of trading. It’s a fascinating list – and it’s littered with companies that ended up in the graveyard.
- VA Linux: up 697%
- Globe.com: up 606%
- Webmethods: up 507%
- Free 蜜桃传媒s: up 483%.
The companies that generated the most spectacular first-day pops are almost without exception either bankrupt, acquired for pennies, or trading far below their first-day close.
The latest example? NewsMax (NMAX).
It surged 735% on its first trading day in March 2025 – the single largest first-day pop for any IPO raising at least $40 million in recorded history.
But as I write on Thursday, NMAX trades at less than $9 a share. And as to that day-one pop, well, imagine buying at the top of the peak below…
The very feature that made those IPOs feel like the opportunity of a lifetime was the signal that something had gone wrong in the pricing process.
Bottom line: The more a stock pops on day one, on average, the more it underperforms in the years that follow.
So, if SpaceX surges 50% tomorrow, treat it as a yellow flag – not a green light.
The action step: focus on the foundations, not the castle
None of this means the AI and space revolution isn’t real. It is.
And none of it means there’s no money to be made in this moment. There is.
What the data shows – clearly, consistently, across 45 years – is that the money is rarely made by retail investors buying IPOs. It is made by the investors who owned the ecosystem around these companies before Wall Street showed up to reprice it.
I’m talking about the semiconductor supply chain. The power infrastructure. The networking equipment. The data centers. The picks-and-shovels plays that benefit from the AI buildout regardless of which company ultimately wins.
The economist Burton Malkiel once sorted all of investing into two camps: stocks that rest on firm foundations of profits and cash flow, and stocks built as castles in the air, held aloft by belief.
SpaceX may eventually become a massively profitable winner – but right now, it looks more like the grandest castle ever floated. But while everyone stares up at the castle, the foundations go on sale.
Our technology expert, Luke Lango, editor of , has been building this framework for his subscribers.
Here he is explaining:
SpaceX is offering 555,555,555 shares at $135 apiece, valuing Elon Musk’s rocket company near $1.75 trillion — more than 90 times last year’s revenue. Morningstar ran its own numbers and landed nearly a trillion dollars short of that figure.
The biggest gains from landmark technology IPOs have almost never gone to the investors who bought on day one. They’ve gone to the investors who owned the ecosystem around those companies before Wall Street showed up to reprice it.
The window to get in ahead of that repricing is open right now. I don’t know how much longer it stays that way.
Luke calls this the – identifying the publicly traded companies that supply, power, and benefit from the AI giants, and owning them before the IPO roadshow begins.
For the specific stocks he thinks you need to own as SpaceX, Anthropic, and OpenAI reprice their sectors, .
Tomorrow’s Investing Insider issue goes even deeper on Ritter’s data and what it means for the coming IPO wave. .
Wrapping up…
The SpaceX IPO will dominate the financial conversation tomorrow. Maybe it pops 30%. Maybe it doubles. Maybe it becomes one of the decade’s greatest investments.
But the data shows that, historically, the odds have not favored the average retail investor who buys on day one – and the more spectacular the pop, the worse those odds have tended to be.
So, if you still want to go in tomorrow, eyes open.
, not the castle.
Have a good evening,
Jeff Remsburg
