The IPO market has returned to the spotlight as several high-profile companies continue to capture investors' attention. Companies like SpaceX have renewed interest in initial public offerings, while investors continue to watch for potential future public listings from firms such as OpenAI and Anthropic.
An IPO, or initial public offering, is the first time a private company sells shares to public investors. Before an IPO, ownership is usually limited to founders, employees, and private market investors like venture capital firms. After the IPO, shares trade on a public exchange, where regular investors can buy and sell them.
Companies go public for many reasons – to raise money, create a market for their shares, or allow early investors or employees to sell some of their holdings. One important point: many retail investors do not get to buy at the official IPO price.
That price is usually set before actual trading begins and is often allocated mainly to institutional investors and certain brokerage clients. Retail investors typically buy post-IPO companies on an exchange, at prices that may be much higher than the original IPO price.
Most widely owned stock indices weigh companies by market capitalization. As a company's value rises, its index weight automatically increases. This rewards successful businesses, but it can also allow yesterday’s winners to become tomorrow’s dominant portfolio exposures.
Recent U.S. market gains have been led by a narrow group of mega-cap companies tied to technology, digital platforms, semiconductors, and artificial intelligence. Several of these firms are exceptional businesses, but their common return drivers mean they may not provide as much diversification from one another as their different company names suggest.
With IPOs, the question is not simply, “Is this a great company?” It is also, “Is this a great investment at the price at which I can buy it?” Like all investments, price matters. A company may have strong growth, loyal customers, and a well-known brand, but if investors pay too much, future returns may disappoint.
Investors should also understand that early investors, employees, and insiders often sell their shares after a “lockup” period (typically around 180 days), creating pressure on the stock price. This does not mean every IPO will fall after lockup expiration, but it is one reason newly public stocks can be volatile. The Westmount IPO tracker shows that over 60% of IPOs underperformed the S&P 500 in their first year.
IPOs may have a place in an investor’s portfolio, but we believe they should be approached with discipline. For many investors, the most practical way to gain IPO exposure is through a diversified, professionally managed portfolio rather than trying to pick individual IPO winners.
Professional managers can evaluate the company’s financials, valuation, lockup schedule, competitive position, and portfolio risk, then decide whether the stock deserves investment, and at what size. In our view, the foundation of a long-term investment strategy should be a diversified core portfolio aligned with an investor’s goals, time horizon, and risk tolerance. Smaller “satellite” allocations, managed by professional investment managers, may complement that core and can include selective exposure to IPOs.
IPOs can be exciting, but a compelling company doesn’t automatically make a compelling investment. Understanding valuation, risk, and how a new investment fits within your broader portfolio can help keep short-term excitement from overshadowing long-term goals.
At EmVision, we help clients build investment strategies designed around their goals, time horizon, and comfort with risk. Contact us today to discuss how your portfolio fits into your bigger financial picture.
James Artale is a financial advisor located at EmVision Capital Advisors, 251 W. Garfield Rd. Suite 155 Aurora, OH 44202. He offers securities and advisory services as an Investment Adviser Representative of Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. He can be reached at (330) 954-3770 or at info@emvisioncapital.com.
Securities and advisory services offered through Commonwealth Financial Network®, Member FINRA/SIPC, a Registered Investment Adviser. Additional advisory services offered through EmVision Capital Advisors, LLC are separate and unrelated to Commonwealth. Fixed insurance products and services are separate from and not offered through Commonwealth Financial Network. Registration as an Investment Adviser does not imply any level of skill or training.
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8982335.1 | 06/2026 | EXP 06/30/2028