Author: Davis Finke, CFA
For more than two decades, SpaceX relied exclusively on private capital markets. That changed in June 2026, when the company completed the largest initial public offering (IPO) in history. The offering raised approximately $75 billion and brought SpaceX to the public market at a valuation of $1.77 trillion. As a result, SpaceX immediately became one of the largest public companies in the world, despite losing nearly $5 billion in 2025. With two additional blockbuster IPOs on the horizon from Anthropic and OpenAI, the initial success of SpaceX’s offering has set a new precedent for large, high-growth companies with lofty valuations. As headlines continue to promote these companies as generational opportunities, many investors are understandably eager to participate. However, with three potential IPOs of historic size arriving in such a short period, it is important for investors to be aware of the potential risks and avoid letting emotion drive investment decisions.
The SpaceX IPO was unique for a number of reasons. According to the Securities and Exchange Commission, the average IPO in recent years has typically raised between roughly $150 million and $250 million in proceeds, making SpaceX’s $75 billion offering hundreds of times larger than a typical IPO. Because of its extraordinary size, SpaceX is immediately relevant to many market indexes, prompting some major index providers to change their inclusion rules and allow very large IPOs to bypass the traditional, months-long waiting period. For funds that passively track those indexes, inclusion can require them to buy shares of SpaceX, creating additional demand that is driven by index construction rather than a fresh assessment of the company’s fundamentals. Adding to the complexity is the relatively small tradable float, with estimates suggesting that only around 5% of the company’s total shares were initially available to trade. The remainder is held by insiders, employees, and pre-IPO investors, many of whom are subject to lockup restrictions that prevent them from selling until a later date. When investor enthusiasm is high but relatively few shares are available, prices can move sharply. Later, as lockups expire and more shares become available, the supply-and-demand balance can shift again. These dynamics create uncertainty around the stock’s true fundamental value and can lead to heightened volatility.
A recent research report by Edward Jones examined the historical performance of 30 of the largest IPOs from companies in the Russell 3000. While these companies produced positive returns on average during their first day of trading, that early momentum faded quickly. After three months, the average return was -2.8%, underperforming the S&P 500 by nearly 6%. The underperformance persisted over the first year of trading, with the group’s average total return trailing the S&P 500 by roughly 15%. In other words, the initial enthusiasm surrounding large IPOs has not typically translated into sustained outperformance. These stocks were also much more volatile. Volatility measures how rapidly and dramatically a stock’s price fluctuates, and during the first year of trading, the average volatility for these 30 IPOs was around 52%, compared with a long-term average of roughly 16% for the S&P 500. These sharp price swings reflect the complexity often associated with newly public companies, including lockup periods, index inclusion, limited trading history, and limited operating history as a public company.
Investing in an IPO requires an added level of discipline. With the potential for higher risk and volatility, investors should ask whether the opportunity aligns with their goals, time horizon, and risk tolerance. For most investors, a well-diversified portfolio built around their personal risk characteristics has historically been a more consistent approach to building long-term wealth. IPOs can attract significant attention, especially when the company is large, well-known, and tied to exciting areas of innovation. With additional potential IPOs on the horizon, investors should weigh the excitement of these offerings against the volatility they can bring to a portfolio especially in the short run.
