When IPOs Dominate the Conversation
When a company that most people recognize goes public, suddenly it's everywhere. Media coverage spikes. Everyone is talking about the opportunity, and that conversation itself becomes part of the appeal. It feels like a moment, like something worth catching.
The behavioral finance here is straightforward. Research shows investors gravitate toward companies receiving news coverage, not necessarily because fundamentals support it, but because the media presence makes the decision feel simpler. When a story dominates the headlines, that prominence reads like investment information. In reality, it's just visibility.1
The marketing machinery around an IPO is real and purposeful. It's designed to create momentum and a sense that this matters now. Most individual investors don't even have a chance to buy shares at the open. The gap between the buzz and the mechanics is where the first disconnect appears.
What Actually Happens When a Company Goes Public
The company's investment bank runs a roadshow. Executives present to large institutional investors and other asset managers, measuring appetite at different price points. That book-building process helps determine the offering price. By the time that price hits the news, roughly 90 percent of shares have already been allocated to institutional investors.2
Typically, individuals have limited access to that offering price. They can participate once the shares begin trading.
The average first-day increase from offering price to close has been 19 percent since 1980 across 9,000-plus IPOs, according to a 2026 study by the University of Florida. That pop goes to whoever purchased shares at the offering price.3
This pricing is intentional. Underwriters often price deals slightly below what the market will initially pay. That first-day pop makes headlines. It can help generate enthusiasm and momentum.
Some IPOs Open Negatively
Some IPOs have negative first-day returns. The ones that typically get press coverage are the ones with the biggest first-day moves, in either direction. The majority that open flat or down generate no headlines. The market narrative about IPOs often gets written by a minority of deals.
The Lockup Expiration Reality
After an IPO, insiders and early investors typically face a lockup period. They can't sell for 90 to 180 days. When that expires, shares can hit the market at once. The people who took the risk during the company's startup years are exiting. Research shows that lockup expirations can coincide with selling pressure, particularly in situations where investors are eager to redeploy capital.4
By the time most investors have even heard the IPO story, the growth narrative can be reflected in the stock price. Companies going public today are mature relative to what used to happen. They're also much larger. In 1980, the median IPO company had $16 million in revenue. Adjusted for inflation, that's about $64 million in today's dollars. By 2024, that number had reached $218 million, according to the University of Florida.5
That entire trajectory, from startup to $218 million in revenue, happened in private markets. Founders, employees, and early venture investors captured it. Also, private equity partners often participate with companies through their fastest-growth years.5,6
This doesn't necessarily make any IPO a poor investment. It means you're buying into a company at a different stage.
What the Data Really Shows About Long-Term IPO Returns
Academic research shows something very different from the opening-day narrative.
Roughly 56 percent of IPOs bought at the offer price lost money after 3 years. That number rises to 57 percent after 5 years. The numbers are higher when shares are bought at the first day's closing price: 60 percent lost money after 3 and 5 years.7,8
The relationship between opening-day hype and long-term results can move in opposite directions. Companies generating the most media attention and investor enthusiasm often are the ones that deliver the most disappointing results.
The Gap Between a Great Company and a Well-Priced Investment
A company can be genuinely innovative, capable of reshaping its industry, as well as well-managed, and still be priced in a way that may leave limited upside for a new investor.
This distinction gets lost in IPO conversations. Believing in a business and having a real investment thesis at a specific price are separate things. At IPO, shares are priced to reflect future growth. When enthusiasm runs high, that anticipation gets priced in aggressively. If you're buying after the opening pop, you're betting the company will grow faster than what’s already reflected at the current price.
There's a documented bias called familiarity bias. The people most excited about a company are often its most loyal customers. That personal connection, that belief in what the company does, can override the price discipline that makes investing work over time.
What Questions to Consider Before Acting on IPO Excitement
No checklist replaces a real conversation. But there are questions worth working through before interest becomes a position.
1. What percentage of the overall portfolio would this represent? There's a real difference between a large position and something sized by enthusiasm.
2. Am I investing in a business or a narrative? A compelling story is not the same as a compelling business model.
3. What would have to be true for this business to work long-term? Is that scenario realistic, or does it require everything to go right?
4. Would I still want to own this company in five years? Warren Buffett said, "If you aren't willing to own a stock for 10 years, don't even think about owning it for 10 minutes."
5. What's the alternative? How does this IPO compare to what else we might do given the full picture of your overall financial strategy?
These considerations can help you strategize.
Where This Conversation Adds Value
Following a company is entirely reasonable. Reading about what it does, watching how management handles being public, and staying informed, all of this makes sense.
Taking a position based on media coverage and opening-day momentum is a different decision with real consequences. This is where a financial professional can help offer perspective. What clients need from us is help making the decision based on their goals, time horizon, and risk tolerance, not on the moment's narrative.
We help clients see the difference between what the markets are saying today and what their actual long-term strategy requires. We can help them stay disciplined when the excitement is loudest. We show them how to manage emotional decisions that can lead to poor choices.
That's not about missing opportunities. It's about capturing the ones that actually matter to the outcome.
If you have questions about your approach to IPOs or about whether new investment opportunities fit into your overall financial strategy, we'd welcome the conversation.
Frequently Asked Questions
What Is an IPO Lockup Period, and Why Does It Matter?
A lockup period prevents company insiders, employees, and early investors from selling shares for a set time after the IPO. It typically lasts 90 to 180 days. When it expires, a large volume of shares can become available for sale at once. Research shows lockup expirations can lead to increased volatility.7 When insiders with large holdings all exit at the same time, it can create some downward price pressure for current shareholders.
Do Individual Investors Get IPO Shares at the Offering Price?
Yes and no. The offering price is set for institutional investors and perhaps a small number of individuals before trading opens. Most investors have an opportunity after the company begins trading.
How Have IPOs Historically Performed Over the Long Term?
56 percent of IPOs bought at the offer price lost money after 3 years. That number rises to 57 percent after 5 years. The numbers are higher when bought at the first day's closing price: 60 percent lost money after 3 and 5 years.8
The relationship between opening-day hype and long-term results can move in opposite directions. Companies generating the most media attention and investor enthusiasm often are the ones that deliver the most disappointing results.
Why Do Companies Go Public If Insiders Are Already Prepared to Exit?
IPOs serve multiple purposes: they give early investors a path to liquidity, they raise capital for growth or debt repayment, and they raise the company's public profile. The process is structured to benefit the company, founders, and early backers. This isn't inherently at odds with a good outcome for new public buyers, but those motivations deserve consideration when deciding whether this investment fits your overall strategy.
How Is the IPO Offering Price Actually Determined?
Investment banks hired by the company run a process called book-building. They present to institutional investors and measure demand at various price levels. The final offering price reflects that aggregated demand. Because underwriters typically price deals to generate strong first-day interest and positive press, companies are often priced slightly below what the market will initially pay.
Why Does Media Coverage of IPOs Matter to My Decision-Making?
Media coverage of IPOs can influence how people view the company. Research in behavioral finance shows investors gravitate toward stocks receiving news coverage.1
What dominates the headlines and what justifies an investment are often different things.
1 SavantWealth.com, February 19, 2026.
2 Fidelity.com, 2026.
3 Warrington.UFL.edu, February 25, 2026.
4 ResearchGate.net, July 2026.
5 CarsonGroup.com, December 29, 2025.
6 CNBC.com, October 7, 2025.
7 PipelineRoad.com, March 5, 2026.
8 NovelInvestor.com, June 10, 2026.
All performance referenced is historical and is no guarantee of future results. All investing involves risk, including possible loss of principal. No investment strategy can guarantee success or protect against loss.