Investing in IPO’s

Introduction

IPOs have been all the buzz recently. With news that SpaceX, Anthropic, and OpenAI are going public within the near future, retail investors are chomping at the bit for a piece of these notable companies. But should they invest? And what's the right way to do it? 

What is an IPO?

An IPO is an initial public offering, in which a private company makes an initial offering for the public to invest in it by selling shares on the stock market. Companies often go public to raise capital for expansion and growth, as well as to repay debt. Take, for example, SpaceX. The company needs capital to continue funding its projects, such as Starship and Starlink development (as mentioned in our April 2, 2026, article on the SpaceX IPO). 

A recent example of a successful IPO is Kailera, an obesity-focused biotech company that IPOed on April 17th. The company raised $625 million by distributing nearly 40 million shares to the public at $16 per share. The stock is now up roughly 30%, trading at about $21 per share (at the time of writing this article). A strong IPO like this one is a signal that the market is ready for IPOs after a dry stretch for companies sidelined by valuation gaps, stubborn interest rates, and macro volatility since Covid in 2020. For more on the Kailera IPO, read the full article here. As mentioned in the introduction, OpenAI is rumored to IPO around late Q4 2026 or possibly early Q1 2027, and Anthropic is expected to debut as early as October, 2026. Successful IPOs by these companies would cause significant market changes, shifting indexes, and opening the door for multiple other private companies to go public. 

Pros and Cons

While it might seem like a no-brainer for an investor to buy a share of SpaceX the day of its IPO, these initial stock offerings often come with major dangers. The main danger is over-hype and its influence on a company's valuations. This initial hype can cause share prices to plummet after the first day, once excitement wears off, and for an extremely anticipated company like SpaceX, over-hype is a real possibility. Another risk of investing in IPOs is the high price volatility and the fact that they can serve as “exit liquidity” for early insiders. 

With dangers come potential upsides, and for IPOs, one is the possibility of large early gains. Some IPOs surge right after going public, giving initial investors the opportunity to profit quickly. Another pro for IPOs is immediate access to high-growth companies early, and in the case of SpaceX, access to a dominant player in the relatively unsaturated space sector. With all stocks, there's also the possibility of long-term upside, as companies like Amazon and Tesla have delivered extraordinary returns and growth since their initial IPOs decades earlier. 

Conclusion

IPOs are never a sure thing, but for the retail investor, that's exactly what makes them so compelling. The opportunity to get in early on a transformative company can be incredibly hard to pass up. It's important that investors know the pros and cons of investing in initial public offerings, but the key is to go in with clear eyes. It's important to understand exactly what's being bought and whether the stock price reflects the company's true value, not just hype and buzz. 

While some IPOs go on to become market-defining companies, many others struggle once public markets begin demanding consistent earnings, growth, and execution. In many cases, early excitement can push valuations far beyond what fundamentals justify, creating significant downside risk once momentum fades. For investors, IPOs should not simply be viewed as opportunities to chase headlines or social media attention, but rather as investments that require the same level of research, discipline, and long-term thinking as any other stock purchase.