The initial public offering is one of financial markets' most reliably overhyped events. The narrative is seductive: get in early on the next great company before the crowd. The reality is considerably less flattering.
The structural problem is one that retail investors rarely appreciate: by the time an IPO reaches the public, institutional investors, venture capitalists, and underwriting banks have already extracted the majority of value. The IPO price is not the ground floor. It is closer to the roof. Retail investors are not getting in early, they are providing the exit.
The evidence is not ambiguous. Uber Technologies listed on the New York Stock Exchange in May 2019 at US$45 per share, valuing the company at approximately US$82 billion. Within six months, the stock had fallen below US$27. Investors who bought on day one waited over two years to return to the IPO price. Lyft, which listed weeks earlier at US$72 per share, has never recovered that valuation. Rivian Automotive raised US$13.7 billion in its November 2021 IPO, one of the largest in American history, and subsequently lost more than 90% of its peak value.
The pattern holds domestically. Guzman y Gomez, as a recent example, listed in June 2024 at A$22 per share and surged 36% on debut, exactly the kind of opening day excitement that draws retail investors in at elevated prices. Those who chased the momentum near A$30 have since seen the stock fall below its IPO price, with shares trading around A$18 and touching a 52-week low of A$15.06 in April 2026. Notably, Morningstar valued GYG at A$15 at the time of listing, well below the offer price. Retail enthusiasm ran well ahead of that fundamental assessment.
Research consistently shows that IPOs underperform the broader market over a three to five year horizon after listing. The danger for retail investors is not simply price volatility, it is the asymmetry of information. Institutional allocations are distributed before opening trade. Lock-up expiry periods, typically 90 to 180 days post listing, see insiders legally permitted to sell, and they frequently do, driving prices lower precisely as retail enthusiasm peaks. You're getting in at the moment that the big money is getting out.
Hype is the product being sold. The shares are secondary.
Financial Disclaimer. This content is general in nature and has been prepared without taking into account your personal objectives, financial situation, or needs. It does not constitute financial product advice under the Corporations Act 2001 (Cth). Before acting on any information contained in this post, you should consider whether it is appropriate for your circumstances and, if necessary, seek independent financial advice. References to specific companies, markets, prediction tools, or investment strategies are for informational and educational purposes only and do not constitute a recommendation to buy, hold, or sell any financial product. Past events and probabilistic frameworks discussed are not reliable indicators of future performance.