Major initial public offerings typically experience a difficult first year after listing on public equity markets, according to an analysis by Truist Wealth.
This finding comes as investors prepare for the upcoming SpaceX debut. The analysis suggests that the scale of a listing does not insulate a company from post-IPO volatility or performance lags.
Truist Wealth reviewed 30 major IPOs over a 15-year span [1, 2]. The study focused primarily on the Nasdaq and other U.S. public equity markets. The data indicates that large listings often face a rough ride during their first 12 months of trading [1].
These trends provide a cautionary backdrop for SpaceX, which is eyeing a significant market entry. Estimates for the company's target valuation range from $1.75 trillion [3] to $2 trillion [4]. Such a valuation would make it one of the largest public companies in the world.
To facilitate the transition to public trading, 30% of SpaceX IPO shares have been earmarked for retail investors [5]. This move is intended to broaden ownership beyond institutional buyers, though the Truist Wealth data suggests retail participants may face significant short-term price swings.
Market analysts said that the first year of a public listing is often characterized by high volatility as the market attempts to price the company's long-term growth against its immediate financial performance. This pattern has persisted across various sectors over the last 15 years [2].
“Major IPOs are typically a rough ride in the first year.”
The Truist Wealth analysis highlights a systemic pattern where the hype surrounding a 'mega-IPO' often leads to an initial overvaluation, followed by a correction as the company meets the rigorous quarterly reporting requirements of public markets. For SpaceX, the combination of a multi-trillion-dollar valuation and a high percentage of retail share allocation could amplify this volatility if early performance does not immediately justify the premium price.
