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The hype machine is running at full speed… What Jay Ritter’s 45-year database shows… And the back door to AI’s biggest winners before Wall Street reprices them…
Don’t do it – don’t buy SpaceX (Spex) Subscription tomorrow.
Or, if you insist, at least do it with your eyes open.
The hype machine surrounding this IPO is unlike anything Wall Street has produced in years. The financial media is wall to wall with breathless coverage. Reports indicate that investor demand has exceeded $250 billion – more than three times the size of the supply itself.
Analysts are forecasting valuations that would make SpaceX worth more than any company on Earth except for a handful.
It’s a simple, seductive story: This is a once-in-a-generation company, and if you don’t make it public, you’ll regret it forever.
maybe.
But before you apply tomorrow morning, meet Jay Ritter.
He’s a professor at the University of Florida and, without exaggeration, the world’s premier academic authority on IPOs. Its database covers 45 years of the history of US IPOs – more than 9,300 offerings.
Ritter produces the source material on which almost every serious analysis of an IPO on Wall Street is based. Goldman cites. Cited by JP Morgan. The Securities and Exchange Commission cites this.
Tomorrow, I’ll be publishing in-depth information about the coming wave of IPOs in the latest issue of the magazine Investing from within – My separate weekly investment letter – by reviewing Ritter’s data in more detail. What follows today digest It’s a shortened version of what I found.
And I’ll be direct: This should give any retail investor serious pause before chasing tomorrow’s opening, or any of the string of high-profile IPOs on the way.
Pop music on the first day is not for you
When SpaceX begins trading tomorrow, the financial media will be leading with one number: Day One return. This number will almost certainly be large.
The first-day pop-up phenomenon is a perennial feature of IPO markets — Ritter data shows that the average IPO from 1980 through 2025 closed its first trading day at 19% above the offering price.
The problem is that you – the average investor – are unlikely to get the offer price.
That price goes to institutional investors – mutual funds, hedge funds, and pension managers who are sponsored by underwriting banks as clients. By the time a typical retail investor can buy SpaceX stock, the stock will already be trading at its inflated first-day price.
Now, SpaceX is said to be trying to find a workaround here. It has reserved 30% of the total IPO shares specifically for retail investors. However, the $135 stock order deadline passed yesterday. If you do not place an order, you will have to wait until the stock begins trading on the NASDAQ.
Additionally, the IPO is currently “oversubscribed,” meaning investors have requested as much as four times the available shares of SpaceX. For this reason, brokerage firms cannot guarantee complete orders.
So, again, odds are that if you’re the average investor, you’re not buying at the offer price. You are buying after The pop has already happened.
Which means 19% profit on the first day?
It was never yours.
So, who gets that?
Tomorrow brings with it huge transfers of wealth. from Retail buyer to Insiders and institutions who were there first.
Ritter identifies just one part of this: Since 1980, $250 billion has been left on the table through underpricing on day one alone – money that flowed to institutional allocators who acquired shares at the offer price while retail buyers could only buy after the pop.
There’s a phrase being bandied about in some financial circles: Instead of “initial public offering,” IPO stands for “potentially overpriced.”
But there is a darker version that I mentioned before in digest: “Introductory general discharge.”
In other words, IPO day is when insiders and early backers use public markets to hand off risk to new buyers at peak valuations.
After 45 years of Ritter’s data, I’m not sure either classification is wrong.
What happens after pop
While most IPO coverage is obsessed with the first day, Ritter has spent decades measuring what happens over the next three to five years. The results should be required reading for any retail investor considering buying into the upcoming IPO wave.
The bottom line: IPO buyers — who buy at the first day’s closing price, not the offering price — underperformed the market by about 20.5% on average over the next three years.
This results in approximately 5.5% per year underperformance versus simply owning an index fund.
Think about that for a moment…
After all the excitement, all the media coverage, and all the analyst upgrades – the average person who buys an IPO at the first IPO or shortly after it debuts would have been better off, by a wide margin, simply buying the S&P 500.
But see for yourself…
The chart below dates from 2013. The red line is the S&P 500. The blue line is a basket of IPOs.
The difference in performance – 428% for the S&P versus 155% for the basket of IPOs – is the cost of chasing new issues rather than owning the index.
Source: Max Marton / Morningstar
The numbers get even worse when you break down the data by profitability.
Profitable companies that go public have underperformed the market by about 13% over three years – a poor result in itself.
But what happens when an unprofitable company goes public?
SpaceX, OpenAI, and Anthropic are all going public without achieving consistent profitability, while burning capital on a scale that would draw serious scrutiny in any other context (to be clear, SpaceX’s Starlink division is very 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. This is approximately two and a half times worse.
Goldman’s track record says: Be careful
Ritter data tracks the long-term performance of an IPO by the lead underwriter — the bank whose name appears at the top left of the prospectus, and whose job is to price the deal and generate investor enthusiasm.
Goldman Sachs is the lead underwriter for SpaceX’s IPO. JPMorgan is also participating.
So how have Goldman-led IPOs fared for investors who bought them?
From 2012 through 2021, Goldman Sachs led 272 IPOs. These trades produced an average first-day return of 27.6% – a great day for institutional allocators.
But for investors who bought at the first day’s closing price and held for three years, the market-adjusted return was a negative 25.6%.
To be clear, this is not an absolute comeback. The investor did not lose 25.6%. This is the degree of underperformance compared to the market.
After all the excitement, all the media coverage, and the risk of buying one unproven company, investors would still have been better off, by a wide margin, by simply owning the index.
JPMorgan’s performance record over the same period: negative 10.5% on a market-adjusted basis.
Hall of Fame doubles on day one
Ritter tracks every IPO that has doubled on its first day of trading. It’s an impressive list – and it’s full of companies that have ended up in the graveyard.
- VA Linux: 697% increase
- Globe.com: up 606%
- Web methods: 507% increase
- Duty Free Shops: 483% increase.
The companies that produce the most impressive first-day spreads are almost without exception either bankrupt, acquired for pennies, or trading at a price well below their first-day close.
Latest example? New Max (nmax).
It rose 735% on its first day of trading in March 2025 — the largest first-day increase of any IPO raising at least $40 million in recorded history.
But as I write on Thursday, NMAX is trading at less than $9 a share. And as for that first day, well, imagine buying at the top of the top below…
The very feature that made those IPOs seem like the opportunity of a lifetime was the indication that something had gone wrong in the pricing process.
Bottom line: The more a stock rises on the first day, on average, the more poorly it performs in the following years.
So, if SpaceX shares rise 50% tomorrow, it should be treated as a yellow flag — not a green light.
Action Step: Focus on the foundations, not the castle
None of this is to say that the AI and space revolution isn’t real. that it.
None of which means that there is no money to be made at this moment. there.
What the data shows – clearly and consistently over 45 years – is that money is rarely made by retail investors buying IPOs. It was manufactured by investors who owned the ecosystem around these companies before Wall Street showed up to reprice it.
I’m talking about the semiconductor supply chain. Energy infrastructure. Networking equipment. Data centers. Picks and scoops plays that benefit from building AI no matter which company wins in the end.
Economist Burton Malkiel once categorized all investments into two camps: stocks built on a solid foundation of earnings and cash flow, and stocks built like castles in the air, soaring high on belief.
SpaceX may eventually become a hugely profitable winner — but for now, it looks more like the biggest castle ever floated. But while everyone stares at the castle, the foundations are put up for sale.
Our technology expert, Luke Lango, editor Innovation investorThis framework was built for its subscribers.
Here he explains:
SpaceX is offering 555,555,555 shares at $135 per share, valuing Elon Musk’s rocket company at approximately $1.75 trillion — more than 90 times last year’s revenue. Morningstar ran its own numbers and came up with roughly $1 trillion less than that number.
The biggest gains from tech IPOs never go to investors who bought on day one. They went to investors who owned the ecosystem around those companies before Wall Street came along to reprice it.
The entry window before the requote is now open. I don’t know how long it will stay like this.
Luke calls this Back door before IPO – Identify and own publicly traded companies that power and profit from AI giants before the IPO roadshow begins.
For specific stocks he thinks you need to own, as SpaceX, Anthropic, and OpenAI reprice their sectors, Click here to see Luke’s full study.
tomorrow Investing from within The issue goes deeper with Ritter’s data and what it means for the next wave of IPOs. Click here to join me and access the full issue.
conclusion…
SpaceX’s IPO will dominate the financial conversation tomorrow. Maybe 30% pops up. Maybe double. It may become one of the greatest investments of the decade.
But the data suggests that the odds, historically, have not been in favor of the average retail investor buying on day one – and the more exciting the popularity, the worse those odds are.
So, if you still want to go tomorrow, open your eyes.
Own the foundationsnot the castle.
I wish you a good evening,
Jeff Remsburg
