The history of megacap initial public offerings shows that the stocks usually slump in the first year of trading. But upcoming listings from SpaceX, Anthropic and OpenAI are big enough and systemically important enough to the market that those analogies may not apply.
All of which poses a crucial timing question for investors: When is the right moment to buy shares in one of the upcoming mega-tech IPOs?
“These behemoth IPOs will rapidly take up both the market share of benchmarks and the mindshare of retail investors,” said Max Gokhman, senior vice president at Franklin Templeton Investment Solutions.
Looking at 30 major technology IPOs over the past 15 years, Truist Wealth found that they averaged a maximum decline of 55% in the first year of trading. Forward returns skewed negative at the six-month mark as well, according to Truist calculations.
There are numerous possible reasons for the weakness, including low public share floats and added selling pressure from the expiration of lockups preventing early investors from selling right away. The difference, however, is the IPOs that are coming aren’t your normal megacap deals.
SpaceX, which is officially known as Space Exploration Technologies Corp., is seeking $75 billion in what’s set to be the largest IPO of all time, valuing the company at about $1.8 trillion. Anthropic has held private funding rounds that value it at $965 billion, and OpenAI is worth $852 billion based on its own fundraising.
All three jumbo-sized offerings are expected to result in market values of more than $1 trillion or at least very close to it. There are currently only 11 companies in the S&P 500 Index with market capitalizations above $1 trillion.
“I have never been asked more about an IPO than SpaceX from our retail clients and advisers,” said Matt Stucky, chief portfolio manager of equities at Northwestern Mutual Wealth Management Co. “That’s interesting, but at the same time it’s also a little concerning just from a risk management perspective.”
The deals come at a time when investors are increasingly fixated on AI, both as a stock market catalyst and risk. Massive amounts of capital expenditures pledged by companies such as Alphabet Inc., Meta Platforms Inc., Amazon.com Inc. and Microsoft Corp. have boosted revenues and stock prices in numerous seemingly unrelated industries, from semiconductors to energy providers to construction firms.
SpaceX, Anthropic and OpenAI are already seen as leaders in this field and are expected to further cement that status in the years to come. But that doesn’t mean buying the shares right after the IPO is the best way for investors to play the stocks.
“You didn’t have to buy the IPO in Google and Facebook to make money on these stocks long term,” Stucky said. “Just because you’re not buying it day one doesn’t mean that it can’t be a good investment for you if you were to buy it six months, a year after the fact.”
