While IPOs get a ton of fanfare for their day-one “pop”, new issues tend to be significantly riskier than other stocks and often underperform the market over longer horizons. Across the largest 20 traditional US IPOs by offer size since 1990, all but five – Medline, Snowflake, AirBnB, Citizens Financial and DoorDash – dipped below their offer price in their first year of trading with a median drawdown of 40.9% from the offer date. Likewise, each faced significant selloffs over the first year with the median of the sample experiencing a drop of 50.8% from their year-one peak and a minimum drawdown of 18.7% (Citizens Financial Group). Volatility bears out the risk of investing in new public shares with median trailing volatility of 51% for the 20 largest US IPOs versus 15.2% for the Russell 3000 in the first year of trading.
Despite a mean first day return of 19% from 1980-2025 based on data from Jay Ritter at the University of Florida, in the longer-term IPO returns are somewhat hit-or-miss. Across our sample of the 20 largest IPOs, only nine outperformed the Russell 3000 over their first year of trading from the offer price (or in the case of SpaceX, Medline and Cerebras, their since IPO return) with a median gain of just 3%. Even looking out three years from the offer date, just seven of the 17 stocks with sufficient history outperformed the market with a median gain of 12.6% versus 35.7% for the Russell 3000. That is consistent with Ritter’s longer-term history showing average 3-year underperformance of 3.3% from the offer price and 20.5% from the first day’s close (using the Morningstar Total Market Index as the benchmark).
Disclosure: HB Wealth is an SEC‑registered investment adviser. The information reflects the author’s views, opinions, and analyses as the publication date. The information is provided for informational purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any investment product. This information contains forward-looking statements, predictions, and forecasts (“forward-looking statements”) concerning the belief and opinions in respect to the future. Forward-looking statements involve risks and uncertainties, and undue reliance should not be placed on them. There can be no assurance that forward-looking statements will prove to be accurate, and actual results and future events could differ materially from those anticipated in such statements. The information does not represent legal, tax, accounting, or investment advice; recipients should consult their respective advisors regarding such matters. Certain information herein is based on third-party sources believed to be reliable, but which have not been independently verified. Past performance is not a guarantee or indicator of future results; inherent in any investment is the risk of loss.
