SpaceX Investors Beware: IPOs Significantly Underperform the Market in Year 1

Investor enthusiasm about the SpaceX IPO is palpable.

Space Exploration Technologies (NASDAQ: SPCX) began trading on Friday (June 12) at $150 a share, 11% above its IPO price. As I write this, it's trading at $166 a share, a 23% premium over the IPO price.

A price bump for a popular IPO is nothing new, especially for tech IPOs. An Edward Jones study of 27 technology IPOs found their average first-day price increase was just above 35%, reflecting initial investor enthusiasm for the new issues.

But early investors should beware. The same study found that the average return for those new stocks was negative 3% after three months and negative 14% after six months.

Image source: Getty Images.

And longer-term studies of IPOs have consistently concluded that IPOs underperform the market over three and five years after their initial public offering.

IPO stocks experience a significant drawdown during their first year

A separate study by the commercial bank Truist Financial Corporation examined 30 major IPOs in the software and tech space. While some popped their first day (many were also down on their first trading day), every single new issue experienced a significant drawdown at some point during its first year in the market.

For example, Palantir Technologies burst out of the IPO gates in September of 2020. The stock was up 13% after a week and 153% after 12 months. Yet it experienced a 53% drawdown at one point during its first year before rebounding.

Facebook, now Meta Platforms, went public in May 2012. The stock was down 31% after 12 months before rebounding.

True, today Meta is a huge success, and the stock has risen more than 1,200% since it went public. But the point is that the first weeks and months after a stock goes public tend to present a pretty poor entry point for investors.

And specifically regarding SpaceX, consider that the company is still far from profitable. The company posted a staggering net loss of $4.3 billion in the first quarter of 2026, while generating only $4.7 billion in revenue. Those losses and meager revenues for a company its size are a big reason why management is so eager to raise fresh cash through a public stock offering.

And then there's Elon Musk, the brilliant but often mercurial CEO of SpaceX. A 2024 study by Fordham University researchers found that Musk's texts and other behavior made Tesla's (NASDAQ: TSLA) stock more volatile.

All in all, it's better to wait on an IPO stock, and that probably goes double for SpaceX.

The title of the Edward Jones research report kind of says it all: "Don't Let IPO Buzz Cloud Your Judgment."

Matthew Benjamin has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Meta Platforms, Palantir Technologies, and Tesla. The Motley Fool has a disclosure policy.