The 2026 IPO rush: why you may want to avoid new issues

SpaceX is now public, and OpenAI and Anthropic may not be far behind. It's the busiest IPO stretch in years, and some clients have asked whether we should be trying to get in on the "next big thing". Generally, our answer is "no". Fifty years of research suggests that IPOs as a cohort underperform the rest of the market from listing for the first few years. Also, I touch on a quiet rule change at Nasdaq that I think deserves more attention and what SpaceX's first six weeks as a public company have shown us.

What the research says

Two findings sit at the center of the academic work on IPOs, and they point in opposite directions. Understanding both is critical.

The short-run pop is real

Roger Ibbotson's 1975 study established a baseline that still holds: new issues tend to be priced below where they first trade, so the stock "pops" on day one. Across 9,343 U.S. IPOs from 1980 to 2025, Jay Ritter's data puts the average first-day gain at 19.0% (the median is a more modest 7.0%). That's the part everyone sees. It's also the part almost no ordinary investor captures — the pop goes to those allocated shares at the offer price, not to people buying once it has already jumped.

The long-run drag is also real

The finding that matters more for long-term investors came later. Loughran and Ritter's 1995 paper — titled, "The New Issues Puzzle" — documented that IPOs underperform comparably seasoned firms from IPO date until three years after listing. On average, buying at the first-day close and holding three years trailed the overall market by roughly 20.5 percentage points. The exciting day-one story and the disappointing multi-year story are both true at once.

U.S. IPOs, 1980–2025. The first-day gain mostly reaches investors allocated shares at the offer price — not those buying at the open. Median first-day return: +7.0%. The long-run figure is the market adjusted return from 1980-2024. Source: Jay R. Ritter (Univ. of Florida) IPO data; Ritter & Welch (2002).

"But couldn't this one be different?"

Maybe. Some IPOs go on to be extraordinary investments — that's exactly why the story is seductive. The problem is that we can't reliably tell in advance which ones, and neither can anyone else. The research describes an average across thousands of listings; it doesn't hand you a way to pick the rare winner from the many that lag.

That distinction is why it is so tough to pick which IPO will outperform and when. Chasing a specific IPO isn't investing in a documented edge — it's speculation dressed up as conviction. And a broadly diversified, low-cost portfolio doesn't miss the eventual winners; it simply holds them once they've become real, seasoned companies, and lock-up periods have expired.

What Nasdaq just changed

Stock markets are amazing compounding machines and they have been tremendous engines for wealth accumulation. Regulators, stock exchanges, and indices have developed rules and best practices to protect investors and encourage transparency. One development I don't agree with is Nasdaq amending their own rules to accommodate the SpaceX IPO. Historically, a newly public stock had to "season" — trade for a stretch, often three months to a year — before a major index would add it. That waiting period isn't bureaucratic dead weight. It exists so a brand-new stock's price can settle before trillions of dollars of ordinary people's money in index funds get pegged to it.

Effective May 1, 2026, Nasdaq rewrote that rule. Under its new "Fast Entry" framework, a large new listing can join the Nasdaq-100 after just 15 trading days. It also eliminated the 10% minimum public-float requirement and added a weighting multiplier for low-float stocks. SpaceX was one of the first beneficiaries, joining the Nasdaq-100 before the open on July 7 — just weeks after listing.

Trading days a new stock must trade before major indexes add it. The Nasdaq-100 window was ~63 trading days (about 3 months) before its May 2026 "Fast Entry" change; S&P Dow Jones was the holdout, reaffirming its 12-month seasoning, profitability, and float rules on June 4. Source: index-provider methodology updates, 2026.

Why this matters even if you never buy an IPO share: more than $800 billion tracks the Nasdaq-100, much of it in funds like QQQ and QQQM that we like a lot for our clients. The rule change meant those funds were compelled to buy a SpaceX around July 7, 2026 before what we view as normal price discovery had run its course. The result is that QQQ and QQQM hold about 1% in SpaceX today. In effect, this new rule provides the insiders that sell their shares a large, rule-mandated pool of forced buyers. That's the part I think is genuinely bad for regular investors.

Last thought: watch SpaceX itself

You don't need a model to see why seasoning exists — SpaceX's own first six weeks made the case. It priced at $135, ran up to a $202 close on June 16, and has since slid all the way back below its offer price, trading near $117 as I write this. By mid-July it had fallen for six straight sessions and shed close to a trillion dollars of market value from its peak.

Daily closing prices since the June 12 IPO; the dashed line marks the $135 offer. The kind of volatility a seasoning period is meant to absorb — anyone who chased the day-one pop is now underwater, and index funds were nudged in near the top. Source: YCharts, as of July 22, 2026.

Our approach, unchanged

• Stay invested and diversified — own the winners by owning the market, not by guessing which new issue is the next big thing.
• Know what your funds hold. A lot of clients hold Nasdaq-100 funds like QQQ, just know it may pick up big new listings faster than it used to. It's not a reason to sell, just something to be aware of.
• Don't confuse excitement with edge. A company you've heard of is not an investment thesis. If it's worth owning, it will still be worth owning after it has seasoned.
• If you truly want IPO exposure, size it as a speculative holding — a small, clearly-labeled "play money" sleeve, not your core.
• Stay tax-aware and focused on the long term, not the headlines.