Big IPOs Often Give Weak First-Year Returns

Many people believe that buying a popular IPO is an easy way to make money. But history shows a different story. Data from many major US IPOs over the last 15 years shows that the average first-year return has been around -30%.

Many well-known companies have followed this pattern. Only a few IPOs gave positive returns in their first year, while most ended up in the red.

Even Popular IPOs Can Fall Quickly

A strong brand name does not always mean strong returns after listing. Even the latest high-profile IPOs have seen drawdowns of nearly 29% to 30% within a short time. This shows that excitement during an IPO does not protect investors from losses. In many cases, the first year remains the riskiest period for new stocks.

Waiting Can Be a Better Choice

Instead of buying an IPO on the first day, it may be wiser to wait for three to six months. This gives the stock time to settle. During this period, early investors can exit, and lock-in periods for some shareholders may end. After the stock becomes more stable, investors can study the business, check the trend, and make a better decision.

Avoid Losing Money at the Beginning

If your goal is to hold a stock for five or ten years, there is little benefit in taking a big loss in the first few months. A fall of 25% to 30% at the start can make it much harder to earn good long-term returns. A patient approach can help reduce unnecessary risk and improve investment decisions.

Understand How IPOs Really Work

Pre-IPO investors usually try to sell their shares at the best possible price. Their main goal is to maximize their returns. As a result, many retail investors end up buying at high prices and later face losses. This is why understanding the IPO process is more important than simply following the excitement around a new listing.

Patience Is the Real IPO Strategy

Some IPOs do rise immediately after listing, but these are the exception, not the rule. On average, many IPOs do not reward investors in the first year. Instead of chasing every new issue, it is often better to stay patient, wait for the stock to stabilize, and invest only after proper research. In the long run, patience can be more valuable than rushing into a popular IPO.