Market Commentary – Breaking Down the IPO Mania
By: Eric Sterner, CFA, CAIA, FRM, CIPM
Chief Investment Officer, Apollon Wealth Management and Apollon Financial
2026 is on pace for a historic year from a US IPO perspective. According to data from Bloomberg, companies going public this year have raised $251 billion through 6/26/26. The US IPO market broke the record for most public issuance at the mid-year point, surpassing the previous record set in 2021*. The IPO momentum is expected to continue in the 2nd half of the year with several planned jumbo IPOs.
With so much media coverage on these IPOs, let’s take a deeper dive into this area of the market including historical performance and risk characteristics.
* Source: Bloomberg
What is an IPO?
An IPO stands for initial public offering, which is when a private company sells shares of stock to the public. These companies are transitioning from private ownership to public ownership. Companies typically decide to go public for one or more reasons including, but not limited to, raising money for growth plans, paying off debts, and/or allowing company management to liquidate their private shares.
There are also other types of equity new issue offerings for companies that are already publicly traded. Some companies may have a follow-on offering and issue additional shares that are already publicly traded. Alphabet is an example of a company that had a follow-on share sale this year as they announced a proposed equity offering to raise $80 billion to fund its AI buildout.
IPO Process
When investors agree to participate in an IPO, they agree to purchase shares at the offering price before the company begins trading on the stock exchange. This offering price is determined by the lead underwriter and the issuer based on a number of factors, including the indications of interest received from potential investors in the offering. Investors will need to determine if their custodian offers access to new issue equity offerings and, if so, what the eligibility requirements are. While investors can technically sell their shares from an IPO once it begins publicly trading, some custodians will restrict their eligibility to participate in future offerings if investors sell within the first several days. The practice of quickly selling IPO shares is known as “flipping,” and it is something most custodians discourage. Investors should always complete their due diligence before participating including understanding any selling restrictions by the custodian and reviewing the company’s preliminary prospectus (“red herring”).
Historical Performance & Volatility
IPOs have changed over the past 20 years from a market capitalization perspective. Companies are typically staying private longer now and more companies are going public as large cap stocks as opposed to 20 years ago when more IPOs had smaller market capitalization. However, what has not changed is that the average IPO typically experiences higher volatility, especially in its first year, than the average publicly traded company. The higher volatility can be attributed to several factors including the expiration of lockup periods which allow insiders to sell shares, investors scrutinizing company financials during their first year of quarterly earnings reports, and, of course, the general economic landscape.
Here are some quick facts* on recent IPO performance, which illustrates this volatility.
- Over the past 20 years, the 10 best performing US IPOs in their first year have averaged 120.4% returns while the 10 worst performing US IPOs during that time period have averaged -78.3% returns.
- The 20 largest US IPOs since 2006 have experienced an average first year maximum drawdown of – 61.8%.
- The 10 largest US IPOs since 2006 have a median 1st year return of -26.2% with returns ranging from +27.4% to -67.3%.
* Source: Bloomberg
To further illustrate their typical heightened volatility, below is a graphic view of how IPOs have performed vs the S&P 500 in their first year going back to 2016.
Source: Bloomberg Finance LP, S&P Global (as of 5/29/26). *2025 IPO Performance data does not include IPOs priced after 5/29/26
Summary
This paper is not intended to encourage or discourage investors from participating in IPOs. Rather the purpose is to make investors aware of the risk / return characteristics of IPOs. Investors should always focus on their long-term investment objectives, but also be prepared for IPO volatility, especially in their first year, if they do participate.
Apollon Wealth Management, LLC and Apollon Financial, LLC (collectively, “Apollon”) are affiliated investment advisers separately registered with the U.S. Securities and Exchange Commission (“SEC”). Registration with the SEC does not imply a certain level of skill or training. Apollon provides investment advisory services based on each client’s individual objectives, financial circumstances, and needs. For clients who have granted discretionary authority, the applicable Apollon advisory firm is authorized to make investment decisions on the client’s behalf in accordance with the client’s advisory agreement. The information contained herein is provided for informational and educational purposes only and should not be construed as personalized investment, legal, accounting, or tax advice, or as a recommendation to buy or sell any security or implement any investment strategy. Investors should consult their financial, legal, or tax professionals regarding their individual circumstances before making financial decisions. Investing involves risk, including the possible loss of principal. Diversification and asset allocation do not ensure a profit or protect against loss in declining markets. Past performance does not guarantee future results.
Any opinions, projections, forecasts, estimates, or forward-looking statements are based on assumptions believed to be reasonable as of the date presented, are subject to change without notice, and should not be relied upon as guarantees of future events or investment results. Information obtained from third-party sources is believed to be reliable; however, Apollon does not independently verify such information and does not warrant its accuracy or completeness. References to indices are provided for illustrative purposes only. Investors cannot invest directly in an index, and index performance does not reflect fees, expenses, or transaction costs.
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https://apollonwealthmanagement.com/ & https://apollonfinancial.com/
