IPOs are exciting. The media buzz, the opening bell, the ticker finally going live—it feels like getting in on the ground floor. But here's the uncomfortable truth: for retail investors, the IPO is almost never the ground floor. It's the penthouse—and the people who built the building are already on their way out.

Every year, billions of dollars flow into newly public companies on the belief that "getting in early" is the path to outsized returns. The narrative is compelling: if you'd bought Amazon at its IPO, you'd be rich. But for every Amazon, there are dozens of companies that destroyed value for IPO-day buyers and never recovered.

This report examines six key datasets from Pitchbook to answer a deceptively simple question: Should you buy a stock at its IPO? The data paints a clear picture:

💡 The statistical approach: Don't buy the IPO. Wait for the post-lockup dip, the earnings reality check, or a genuine flop—then evaluate on fundamentals.

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Before diving into individual companies, it's essential to understand the macro environment that drives the IPO market. IPOs don't happen in a vacuum—they are deeply tied to monetary policy and the cost of capital.

Figure 1: Number of VC-backed IPOs vs. Federal Funds Rate (2020–2025). Source: Pitchbook.

During 2020–2021, with the Federal Funds Rate pinned at near zero, the IPO market experienced an unprecedented surge. Monthly VC-backed IPO counts regularly hit 15–29 listings, reaching a peak of approximately 29 in a single month during mid-2021. The conditions were perfect: interest rates near zero made equities the only game in town, SPAC vehicles provided alternative listing paths, and a flood of retail trading activity created insatiable demand. Companies rushed to go public—many that might have waited another 2–3 years in private markets accelerated their timelines to capitalize on inflated valuations.

Then came the rate hikes. As the Fed raised rates from near zero to over 5% through 2022–2023, the IPO window slammed shut. Monthly counts collapsed to 1–3 listings. Companies that had rushed to go public during the boom now faced a reckoning—without cheap capital to sustain growth-at-all-costs strategies, many saw their stock prices collapse 50–80% from IPO highs.

Even as rates plateaued in 2024–2025, the recovery has been sluggish—averaging only 4–6 IPOs per month, a fraction of boom-era volume. Companies are being more selective about timing, and investors are demanding stronger fundamentals before committing capital to new listings.

What this means for investors:

The 2020–2021 boom was fueled by a historically unusual monetary environment. Many of those companies were rushed to market to capitalize on inflated valuations—not because they were fundamentally ready for public scrutiny. When IPOs are plentiful, quality control is low. The best time to evaluate an IPO is after the euphoria fades.

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The table below showcases the largest VC-backed IPOs by total proceeds. At first glance, the numbers are staggering—SpaceX at a $1.5 trillion exit value, OpenAI at $1 trillion, Anthropic at $500 billion. But the critical question is: wealth creation for whom?

Figure 2: Largest VC-backed IPOs by proceeds raised. Source: Pitchbook.

SpaceX investors turned $50B into $1.5T—a 30x return. OpenAI's backers went from $35B to $1T (29x). Even further down the list, Coupang delivered 16x ($3.5B to $56.5B) and Robinhood delivered 15x ($1.99B to $30B). These are extraordinary returns.

But they are returns for the venture capitalists who committed capital years—sometimes a decade—before the IPO. By the time a retail investor buys on IPO day, the stock is priced to reflect most of that growth. The IPO is the exit event for early investors, not the entry event for new ones.

Warby Parker stands out as the only company where exit value ($1.39B) is significantly below total invested ($3.11B)—a loss of over 55%. It was a media darling with a beloved brand, yet it destroyed more than half the capital invested. If professional VCs can lose money on a company like Warby Parker, retail investors buying at the IPO face even steeper odds.

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If the previous section showed how much value VCs capture before the IPO, this chart reveals what happens after. The post-IPO performance of select US AI companies tells a story of extreme divergence and, for most, disappointment.

Figure 3: Post-IPO stock performance of select US AI companies. Source: Pitchbook.

CoreWeave surged to nearly +360% by day 70 post-IPO—a spectacular run. But even CoreWeave illustrates the danger: after peaking, the stock dropped to around +100% by day 280. An investor who bought at the peak would have lost roughly 60% of their investment. The best-performing IPO in this cohort was still a brutal ride for anyone who didn't time their entry perfectly.

Figma spiked ~275% in the first few days, only to fall back to near 0% by day 120. Carlsmed briefly touched +150% before settling near flat. Ambiq and Figure Technology Solutions have largely traded sideways or slightly below IPO price after brief initial pops.

The consistent four-phase pattern:

💡 If you buy at the IPO, you're buying at the moment of maximum optimism and minimum information. That's a bad trade.

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If the data so clearly argues against buying IPOs on day one, why do millions of investors keep doing it? The answer lies in behavioral finance.

When people think about IPO investing, they think about Amazon, Google, and Netflix—companies that delivered generational returns from their listing price. But this is classic survivorship bias. For every Amazon, there were hundreds of dot-com IPOs that went to zero. For every Google, there were dozens of search engines that IPO'd and vanished. The spectacular winners dominate our memory while the vast graveyard of IPO failures is conveniently forgotten.

Academic research from Jay Ritter at the University of Florida—one of the foremost scholars on IPO performance—has consistently shown that IPOs underperform the broader market by 3–5% annually over the three years following listing. The winners exist, but they're the exception, not the rule.

IPOs are marketed as events. There's a roadshow, wall-to-wall media coverage, analyst initiation reports, and a carefully crafted narrative about disruption. This creates intense fear of missing out. Only a limited number of shares are offered initially (typically 10–20% of total outstanding), and most go to institutional investors with relationships to the underwriting banks.

This artificial scarcity triggers a willingness to overpay that wouldn't exist if the same shares were simply trading on the open market. The underwriters intentionally limit supply to inflate first-day prices, generating headlines about a "successful IPO" and rewarding their institutional clients who received allocations. Retail investors buying in the aftermarket are providing the exit liquidity—buying at the inflated price so insiders and institutions can book their gains.

A company can be genuinely transformative and still be a terrible investment at its IPO price if the valuation already reflects the optimistic scenario. The market prices in expectations, not realities—and IPO expectations are almost always at their most inflated on listing day. By the time the narrative becomes measurable through earnings reports, the gap between story and reality often reveals itself in painful clarity.

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One of the most underappreciated dynamics in IPO investing is insider ownership. When a unicorn goes public, venture capitalists and early employees hold enormous stakes and are contractually restricted from selling for a lockup period (typically 90–180 days).

Figure 4: Median and average share of unicorn investor ownership by unicorn age. Source: Pitchbook.

Investor ownership starts at around 50–55% at year 1, dips slightly around year 2, then climbs steadily as additional funding rounds dilute founders. By year 5, investors own ~57%. By year 8–10+, investors collectively own a median of 60–65% of the company. The average tracks closely to the median, confirming this is a structural feature, not driven by outliers.

With 60%+ investor ownership at IPO, the lockup expiration becomes a predictable selling event. Venture funds need to return capital to their LPs. Early employees rationally diversify. All of this selling pressure converges on a narrow window.

Academic research consistently shows stocks underperform in the 30 days surrounding lockup expiration, with average declines of 2–3% and larger drops for companies with higher insider ownership. For companies where insiders hold 60%+ of outstanding shares, the effect can be significantly more pronounced—5% or more in the weeks surrounding expiration.

The mechanism is straightforward: venture funds have limited partners (LPs) who expect distributions. Fund managers are incentivized to realize gains, especially in mature funds nearing the end of their lifecycle. Early employees, many with significant net worth concentrated in company stock, rationally diversify as soon as they're permitted. All of this selling pressure converges on a narrow window, and the stock price absorbs the full impact. This is one of the most reliable, repeatable patterns in public markets.

💡 With insiders owning 60%+ of shares, the lockup expiration creates a predictable wave of selling pressure. Why buy before it hits?

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Perhaps the most damning chart for IPO bulls. It tracks the share of unicorn IPOs that listed above versus below their peak private market valuation over the past 25+ years.

Figure 5: Share of unicorn IPOs listing over vs. under peak private valuation (2000–2026). Source: Pitchbook.

From 2003 to 2020, the vast majority of unicorns (80–100%) went public above their highest private round valuation. This made sense: companies were growing into their valuations before hitting public markets.

Starting around 2022, the trend reversed sharply. The share listing above peak private valuation has dropped from ~93% in 2020 to roughly 55–65% in 2025–2026. Conversely, the share listing below peak private valuation has surged from ~7% to 35–45%.

What this means:

An increasing number of unicorns are going public at a discount to what late-stage private investors paid. This means: (a) late-stage private investors are underwater at IPO, (b) the companies couldn't sustain their hype-era valuations, and (c) IPO buyers may still be overpaying relative to fundamentals even at these "discounted" prices. When nearly 40–45% of unicorn IPOs can't match their private valuation, it's a clear signal that the market is resetting expectations.

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With the IPO window cautiously reopening, several high-profile companies are in the pipeline. These are the names that will generate headlines and tempt investors to do exactly what this report argues against.

Figure 6: Select upcoming VC-backed IPO filings. Source: Pitchbook.

Cerebras ($23B valuation, $2.9B raised) — Semiconductors

The AI chip maker is the most highly valued name in the pipeline. Cerebras is positioning itself as a competitor to Nvidia in AI training hardware. Expected Q2 2026. Key risk: heavy dependence on a small number of large customers.

Kraken ($20B valuation, $0.9B raised) — Financial Services / Crypto

At $20B on just $0.9B raised, the implied return multiple is enormous (22x). But crypto volatility makes timing critical. The Coinbase precedent is instructive: it IPO'd at $100B+ in April 2021 and subsequently fell more than 80%.

Discord ($14.7B valuation, $1.1B raised) — Communication Software

With 200M+ monthly active users, Discord has a strong product story. The question is whether it can demonstrate a path to profitability that justifies the price. Monetization per user remains well below peers like Snap or Reddit.

Strava ($2.2B valuation, $0.3B raised) — B2C Fitness

The fitness-tracking social network filed in February 2026 for a Q1 2026 listing. Its subscription model provides recurring revenue, but the B2C fitness space is notoriously competitive, and investor enthusiasm for consumer subscriptions has waned post-Peloton.

Motive ($2.9B valuation, $0.8B raised) — Hardware / Fleet Management

Motive provides fleet management and compliance solutions for trucking and logistics. It's one of the few hardware-oriented names in the pipeline. The $2.9B valuation on $0.8B raised is reasonable by current standards, and it operates in a less speculative sector than most tech IPOs.

Fervo Energy ($2.9B valuation, $1.7B raised) — Energy Infrastructure

Fervo represents a fundamentally different kind of IPO—a geothermal energy infrastructure company. With $1.7B raised and no listing date yet, this is a long-duration, capex-intensive business that will appeal to a different investor base than the typical tech IPO. The framework still applies: wait for fundamentals to emerge before committing.

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Taking all six datasets together, a clear framework emerges for approaching IPOs with discipline rather than emotion.

The IPO price is set by underwriters to generate a "pop" that rewards institutional allocators. Retail investors buying in the aftermarket are buying at the inflated post-pop price. The post-IPO data shows this initial pop is usually the high-water mark for months.

With insiders owning 60%+ of shares, the 90–180 day lockup expiration is a predictable catalyst for selling pressure. Mark the date on your calendar and wait for it to pass.

Wait for at least two quarterly earnings reports. This is when the gap between the IPO narrative and financial reality becomes measurable. Private companies can tell whatever story they want; public companies have to file audited numbers.

The best IPO investments are often the ones that disappoint initially. When a hyped IPO drops 30–50% from its listing price, the tourists leave, short-term traders exit, and the stock finds a fundamentally justified level. That's when serious investors can step in with a margin of safety. The upside hasn't changed; only the entry price has improved.

If a company is listing below its peak private valuation (increasingly common), ask why. If the overall market repriced but fundamentals remain strong, that might be a genuine opportunity. If the business deteriorated, the IPO discount may not be enough.

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The IPO market is designed to transfer wealth from public-market investors to private-market insiders. That's not a conspiracy—it's the mechanics of how IPOs work. Venture capitalists spend years accumulating 60%+ ownership in high-growth companies. The IPO is their exit event, not your entry opportunity.

The data is unambiguous:

None of this means IPOs are always bad investments. Some companies will outperform from their listing price. CoreWeave, despite its volatility, generated a 100%+ return for patient day-one buyers. But the statistical odds are stacked against you if you buy on IPO day. You're competing against insiders with better information, institutional investors with preferential allocations, and a pricing mechanism engineered to extract maximum value from public-market participants.

The smartest approach? Let the IPO happen. Let the hype dissipate. Watch the lockup expire and the insider selling wash through. Wait for two earnings reports to separate the narrative from the numbers. And if the stock flops—if it drops 30, 40, 50% from its IPO price while the fundamental thesis remains intact—that's when you have a genuine opportunity. That's when the price reflects reality instead of hope, and the risk-reward calculus finally tips in your favor.

💡 Don't buy the IPO. Buy the company—after the market has finished pricing in the excitement and started pricing in the fundamentals.

Sources & References

Pitchbook. 1Q26 Mega IPOs.

Pitchbook. IPO Outlook for US VC.

PitchBook Analyst Note: Mega IPOs Could Threaten 2026 IPO Class. https://pitchbook.com/news/reports/q1-2026-pitchbook-analyst-note-mega-ipos-could-threaten-2026-ipo-class 

PitchBook. 2026’s fast-approaching mega-IPO wave is expected to reset the VC secondaries market. https://pitchbook.com/news/articles/2026s-fast-approaching-mega-ipo-wave-is-expected-to-reset-the-vc-secondaries-market 

SVCA. Acceleration in Valuation pre-IPO: https://www.svca.org.sg/sites/default/files/2022-09/SVCA%20PEVC-backed%20IPOs%20Study%20and%20Industry%20Commentary.pdf

Repec. Unicorn rounds proceeds study. https://ideas.repec.org/p/zbw/cfrwps/2304.html