Understanding IPOs: What Investors Should Know

​When SpaceX rang the opening bell on June 12, 2026, it did so as the largest public offering in history. Elon Musk's rocket company, at its peak, was valued at $2.97 trillion, with a share price of $225.64 on June 16, 2026. At present, the share price has dropped roughly 50% from their post-IPO peak. This series of events begs the question, should you invest in an IPO and if so, when?

What is an IPO?
An initial public offering is the process by which a private company sells shares to the public for the first time. Before an IPO, a company is owned by founders, employees, and private investors. Once it goes public, anyone can buy and sell its stock on an exchange.

Companies, like SpaceX, choose to IPO for a mix of reasons: to raise capital for growth, provide liquidity for early investors and employees, and fund expensive infrastructure.
 
Primary vs. Secondary Markets
The primary market is where a company sells new shares for the first time, this is the IPO itself. Once those shares begin trading, they move into the secondary market, which is where stocks are bought and sold on the stock market. From that point on, investors are trading shares among themselves rather than buying directly from the company.
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SpaceX sold shares to institutional investors in the primary market at $135. But once trading opened and the stock moved into the secondary market, it opened at $150 and closed at $160.95 on its first day. Four days later it reached a peak of $225.64. 

Many brokerages don't underwrite IPO offerings, which means retail clients typically can't buy at the IPO price itself. Instead, they place orders to be filled once the stock begins trading on the secondary market. SpaceX's listing was a notable exception in that a meaningful share of the offering was allocated directly to retail investors through major brokerages, though even then many people requesting large allocations received only a small fraction of what they asked for.
 
The Reality of IPO Returns
The buzz around a listing like SpaceX's can make IPOs feel like an easy way to get in early on the next big winner, but history tells a different story.

Dimensional Fund Advisors studied more than 6,000 US IPOs between 1991 and 2018 and found that, as a group, they underperformed the broader market in the year after listing. Part of the challenge is structural: the outsized "pop" that often happens on day one of trading is real, but it's typically only available to institutional clients who receive share allocations from the underwriters before the stock opens to the public. Retail investors buying once trading begins are missing that first day move and taking on the underperformance that tends to follow.

SpaceX’s first month illustrates exactly this: shares that opened at $150 and reached $225.64, and now trading closer to $115 in late July. Anyone who bought at the peak is sitting on a loss of nearly 50%.

Lockup Periods
A related headwind is the lock-up period, typically around six months, during which company, insiders, employees, and early investors are contractually restricted from selling their shares. When that period expires, a wave of new selling can hit the stock and cause turbulence to the price.

SpaceX's structure is faster and more aggressive than the standard version. Rather than one six-month lockup, it set up 15 separate release dates running from August into September, with an estimated 44% of insider shares becoming eligible for sale across that window. The first tranche, roughly 20% of locked shares, unlocks in early August, just two months after the IPO. That means the stock's most turbulent stretch yet may still be ahead of it: insiders who bought in well below $135 will have every incentive to lock in gains, right as retail holders are already sitting on losses.
 
The Bottom Line
The data on IPOs, and SpaceX's first month, point in the same direction: the first 12 months after a listing are the riskiest window to be holding the stock, not the best time to buy in. Between the missed first-day pop, the historical underperformance Dimensional has documented, and lockup expirations still to come, there's little reason for an individual investor to rush into a name like SpaceX this early.

There's also a simpler reason to sit this one out: if you already hold broad index funds, you probably own SpaceX anyway. Its inclusion in the Nasdaq-100 last month means anyone tracking that index, directly or through a fund that holds it, already has exposure, sized appropriately alongside hundreds of other companies, without having to bet the outcome on a single volatile stock. That's a better way to participate in a story like SpaceX's than trying to time an individual entry point in its most turbulent year.

​Disclaimers 

• This document is intended as a general guide and does not constitute advice. Please contact us to arrange advice specific to your own situation. 
• All figures, calculations, statistics and tax rates are based on indicative rates as at the date of this article which is noted above.
• Please note this document is not meant to be a comprehensive assessment of the tax rules that could apply under all scenarios and it is possible the tax rates outlined above may change and may be different depending on the individuals’ circumstances. 
• Worked examples are intended as a guide only and the actual return will depend on the product available at the time and the tax rates applicable to your own situation. 
• Examples are for personal investors. Different tax rules apply for Corporations and Charities.