SpaceX Stock Just Closed Above Its IPO Price. Here's What History Says Happens Next.

Shares of Space Exploration Technologies (NASDAQ: SPCX), better known as SpaceX, have been on a wild ride during their first two months since the stock's initial public offering (IPO). The company saw its value touch $3 trillion at its peak just a few days after its market debut, but the market cut that price by more than half at one point, sending the stock price below its IPO price last month.

After its second-quarter earnings report and the first of several lockup expirations, letting early SpaceX investors and employees sell their shares, the stock climbed back above its IPO price. Some investors may see that strong performance in the face of potential selling pressure as a sign that the stock can keep climbing. Here's what history has to say.

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Can SpaceX rocket higher?

It's important to note that SpaceX's trajectory since its IPO isn't uncommon.

Most stocks experience a pop on their first day of trading, just as SpaceX did. SpaceX saw its shares close 19% above its IPO price of $135 per share on its first day of trading.

Most stocks hit a relative high in their first few days of trading before moving lower. SpaceX peaked at about $225 per share on its third day of trading.

Most stocks also eventually trade below their IPO price. SpaceX breached its $135 IPO price on July 15, about a month after its debut.

In fact, 90% of IPOs eventually trade for less than their offer price, with the median stock taking about six weeks to do so, according to an analysis from Banyan Lane Research. Most stocks quickly recover to their IPO price. It took SpaceX 18 trading days to do so. Only 15% of IPOs remain below their offer price one year after breaching it.

Investors expecting a rapid recovery in the stock price and a push toward SpaceX's all-time high may be over-optimistic. Only 60% of IPOs ever get back to the early peak they reached after their debut, and those that do take nearly a year to get there.

How do typical IPO stocks perform?

Since SpaceX stock is mostly behaving as expected for an IPO stock, it's worth remembering that the track record for IPOs, in general, isn't spectacular.

The average IPO since 1980 (excluding the dot-com bubble) produces a total return of 44.2% in its first three years as a publicly traded company. That might sound like an excellent result, with an average compound return of about 13%, but it actually trails the overall market return by 1.6%, according to data compiled by Jay Ritter, a finance professor at the University of Florida. Remember, companies typically go public when stock prices are rising.

The outlook is significantly better for large tech companies. Tech stocks with more than $100 million in annual sales before their IPOs produced average returns that outperformed the market average by 43.1% during their first three years of trading. But averages can mask the fact that 45% of IPOs with more than $100 million in sales still traded below their IPO price after three years.

One last thing to consider is how IPOs with very high expectations perform. We can use price-to-sales as a proxy for expectations. A company with a high price-to-sales ratio is expected to have rapid revenue growth. SpaceX's price-to-sales ratio of 88 is extremely high. IPOs for companies with more than $100 million in revenue with a price-to-sales ratio above 40 produce average three-year returns that trail the market by 15.4%.

SpaceX could defy the odds and perform better than the average IPO. But with expectations already high for the company and continued share lockup expirations weighing on the stock price for at least another year, it will be hard for the stock to keep climbing back toward its all-time high of around $225. In fact, it might struggle to keep pace with the overall market average.

Adam Levy has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.