The IPO market is roaring again. Through the first half of 2026, US companies raised about $128 billion going public, up more than 640% on the year before, and SpaceX just completed the largest IPO in financial history, raising roughly $86 billion at a valuation near $1.8 trillion.
When IPOs get this hot, the temptation is irresistible: buy the exciting new stock on day one and ride the pop. I want to show you why that instinct, so natural and so common, usually hands your money to someone else.
None of this means avoid IPOs. It means understand who is on the other side of your trade before you place it.
US IPO proceeds jumped more than 640% in the first half of 2026 versus a year earlier.
The 60-Second Version
2026 is the hottest IPO market in years: about $128 billion raised in the first half (up 646%), and SpaceX ran the largest IPO ever at roughly $86 billion.
IPOs usually 'pop' on day one, around 15 to 20% on average, but that gain mostly goes to institutions who receive shares at the offer price.
The average IPO has underperformed the market by more than 20% over its first three years.
The excitement is priced in. Your edge is not the hype, it is reading the prospectus.
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The boom is real
Let me start by giving the enthusiasm its due, because the numbers are genuinely historic. US companies raised about $128 billion going public in the first half of 2026, up 646% from a year earlier, with the second quarter alone the biggest on record. Late last year, Medline's $6.26 billion debut jumped 40%, and the momentum only built from there, all the way to SpaceX and the largest IPO the world has ever seen.
A hot market is exactly when discipline matters most. When new listings are surging and every debut pops, it feels like free money. That feeling is precisely the condition under which people overpay. So before you buy the next hot ticker, it is worth understanding how an IPO is actually built, and who it is built to reward.
Who actually captures the 'pop'
An IPO price is set the night before trading by the underwriters, the investment banks running the deal, through a process called book-building. Those shares, at the offer price, are allocated mostly to large institutions. Then the stock opens to the public, often 15 to 20% higher.
The day-one pop mostly rewards institutions who bought at the offer price. The average retail buyer, buying at the open, faces years of underperformance.
The pop is not for you. See the trap. The institutions received their shares at the offer price and capture that first-day jump. Many of them sell straight into the retail demand that drives the open. If you are buying on day one, you are not catching the pop. You are the person paying for it. The excitement you feel is, quite literally, their exit.
The three-year truth
The day-one story is bad enough. The long-run story is worse, and it is remarkably consistent.
The average IPO is a market laggard. Across nearly 10,000 IPOs since 1980, the average newly public company underperformed the broader market by more than 20% over its first three years, measured from the close of its first trading day. Hot debuts fade. The glamorous class of 2021 is the recent reminder: a wave of celebrated IPOs that were trading far below their debut prices within a couple of years. The excitement is front-loaded. The disappointment arrives later, and quietly.
How to actually evaluate an IPO
None of this means every IPO is a bad investment. It means you evaluate it as a business, not a lottery ticket. The document that lets you do that is the prospectus.
Read the red herring prospectus. Is the company actually profitable, or just growing? The risk factors and financials are all there, and most buyers never open them.
Ask why it is going public now. Sometimes it is to fund growth. Often it is insiders and early backers cashing out at a rich price. Those are very different signals.
Check the valuation against peers. A great company at an absurd price is still a poor investment, the same lesson every bubble teaches.
Find the lock-up expiry. Insiders usually cannot sell for 90 to 180 days. When that lock-up lifts, a wave of selling often pressures the stock. Know the date before you buy.
So should you buy the next hot IPO?
Some IPOs are genuinely excellent long-term investments, for people who buy them at a sensible price and hold. But the day-one frenzy is structured to reward the insiders and institutions on the other side of your trade, not the retail buyer chasing the open.
The disciplined move is usually the boring one: skip the debut, let the lock-up expire and the hype cool, and then decide, on the fundamentals, whether it is a business worth owning. The market will still be there. So, often, will a better price.
Reply and tell me the upcoming IPO you want me to break down. I will read the prospectus so you do not have to.
Best regards,
Dheeraj Vaidya, CFA, FRM
Ex-JPMorgan & CLSA
Co-founder, WallStreetMojo
P.S. If you want this plus everything else we teach, our WallStreetMojo All-Access Membership includes the Financial Modeling and Valuation Course along with 50+ courses and certifications covering Investment Banking, Equity Research, AI, and more.
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