Investor Brief: Are IPOs a Mission to Mars or Grounded on Takeoff?

The IPO process typically begins when a private company hires investment banks to act as underwriters. These banks help prepare financial disclosures, market the offering through a “roadshow,” and set an offering price based on investor demand. Shares are initially allocated primarily to institutional investors such as mutual funds, pension plans, hedge funds, and insurance companies. Retail investors typically receive a smaller allocation and often gain access only after trading begins in the public market.

Once shares begin trading, the stock price may move sharply based on supply, demand, and investor psychology. Importantly, the IPO price is not necessarily a measure of fair value; it is a negotiated price designed to help complete a successful offering.

IPO Performance: To the Moon or Just a Near-Earth Orbit?

IPO investing carries a powerful narrative appeal: early access to innovative companies, the excitement of “getting in early,” and the visibility of eye-catching first-day returns. However, decades of empirical research tell a more nuanced story.

Academic and market research from Dimensional Fund Advisors shows that while IPOs often experience strong first-day price pops, these gains are rarely accessible to most individual investors due to allocation constraints. Once trading begins in the secondary market, IPO stocks have historically underperformed comparable public equities over the following one-, three-, and five-year periods.¹ This underperformance is due to several factors, including lofty expectations and lockup expirations (where insider selling 6 to 12 months post-IPO often creates downward price pressure). Since 2008, the S&P 500 Index has outperformed the Renaissance IPO Index by 4 to 5 percentage points annualized.² In short, IPOs feel like the opportunity of a lifetime, but historically have not delivered superior risk-adjusted returns as a group.

SpaceX: Pre-Flight Checklist

SpaceX’s anticipated IPO has the potential to be the largest public offering in history. Current indications suggest a targeted valuation exceeding $2 trillion, with $50–$75 billion of shares potentially offered to the public.³ That valuation would make SpaceX the sixth-most valuable company in the US by market capitalization.

Unlike most IPOs, SpaceX is expected to allocate an unusually large portion to retail investors, with reports indicating Elon Musk plans for more than 20% to be allocated to individual investors, compared to a more typical 5–10%.⁴ Distribution is being coordinated through a consortium of more than 20 investment banks, including Goldman Sachs, JPMorgan, Morgan Stanley, Bank of America, and Citigroup.

Another interesting nuance involves Nasdaq’s recent rule change allowing very large companies to join its major indexes just 15 days after going public, instead of waiting 3 months.⁵ This could create pressure on fund managers tracking those indexes to purchase shares quickly, potentially increasing short-term price volatility.

What’s important for investors to understand is that this IPO represents not just SpaceX’s launch operations, but will also include satellite internet network, Starlink, which currently represents the majority of revenue and profitability. Starlink reported $11.4B in revenue in 2025, representing 61% of SpaceX’s total sales.⁶ SpaceX suffered a net loss approaching $5B last year despite generating revenues in excess of $15 – $18B (losses include xAI, which SpaceX acquired in February).⁷

Still, valuation remains a central issue. At proposed levels, SpaceX could trade at valuation multiples far exceeding most technology and industrial peers. These multiples could imply sky-high future growth, flawless execution, and continued capital market enthusiasm, all of which are possible, but far from guaranteed.

SpaceX may ultimately justify its valuation, but it’s important to remember that buying into the IPO means paying today for expectations light years into the future.

Investing Pre-Launch: How Private Shares Work

For investors looking to gain exposure before an IPO, several avenues exist, each with meaningful trade-offs.

Private Secondary Market Platforms

Platforms like Forge Global, EquityZen, Rainmaker, and Hive facilitate transactions in private company shares, typically sourced from employees or early investors seeking liquidity. These investments often involve:

• High minimums
• Accreditation requirements
• Special Purpose Vehicles (SPVs) rather than direct ownership
• Long holding periods with limited liquidity

While prices may appear discounted relative to public-market expectations, spreads are often wide and information is asymmetric.

Interval Funds

These semi-liquid funds offer diversified exposure to late-stage private companies through a single, public vehicle. Notable features include:

• Low minimum investments (often ~$2,500)
• Availability to non-accredited investors
• Quarterly liquidity (you can purchase daily but redemptions are limited and capped)
• Uneven performance, dependent on liquidity events and IPO timing

These funds can satisfy an investor’s desire for buzzy, pre-IPO private company exposure but potentially should be viewed as long-term, illiquid, and opportunistic.

Splashdown

IPOs, including the SpaceX offering, represent moments of narrative magic in markets where innovation, ambition, and optimism converge. Investors would benefit from asking themselves why they want to participate in an IPO: does this investment improve the probability of achieving long-term goals, or just tell a good story? If, as the research indicates, IPO stocks tend to underperform comparable publicly traded stocks, investors seeking exposure to IPOs are driven more by the latter than the former. There’s nothing wrong with a good story, as long as expectations around the ending are realistic. Leaving aside the practical barriers to IPO participation for individual investors, the outcome is likely to be more earthbound than atmospheric.