SpaceX Stock Is Down 40% From Its Post-IPO Peak. Here's What History Says Happens to Mega-IPOs After a Drop Like This.
Key Points
Many large IPOs have traded below their offering prices after their first year on the market, but then bounced back.
The best gains can come from companies with great fundamentals.
- 10 stocks we like better than Space Exploration Technologies ›
Space Exploration Technologies (NASDAQ: SPCX) continues to enthrall investors, but so far, it hasn't been the hit that many may have been expecting. As of this writing, SpaceX (as the company is also known) is 40% off its peak and well below both its $135 initial public offering (IPO) price and its $150 opening price on its first day of trading.
But what investors really want to know is what comes next: Is it a bargain at the current price, and could this be the right time to buy? What has happened to other mega-IPOs may shed some light on that question.
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Not the stocks you're thinking of
When you hear "mega-IPO," you might be thinking of today's biggest companies, like Apple, Nvidia, and Microsoft. But these companies went public decades ago, at much smaller sizes, before they were household names, and before the mega-IPO was a thing.
In today's world, it's hard to keep a great IPO a secret, and many companies have been waiting to go public until after they've gained status and popularity. Not only was SpaceX the biggest IPO ever, it was followed up only weeks later by the secondary listing of SK Hynix on the Nasdaq, which was the second-biggest initial offering ever and the biggest international IPO ever.
But some of the largest IPOs in history are companies you know about, and some of them have become some of the most valuable companies in the world. Consider Visa, Meta Platforms (which went public as Facebook), General Motors, and Rivian.
| Company | IPO Value | Current Value | Share Price Change After 1 Month | Share Price Change After 1 Year |
|---|---|---|---|---|
| Visa | $18 billion | $676 billion | 22% | (7)% |
| Meta Platforms (Facebook) | $16 billion | $1.6 trillion | (18)% | (31)% |
| General Motors | $23 billion | $69 billion | 0% | (36)% |
| Rivian | $12 billion | $22 billion | 15% | (70)% |
Data source: YCharts, CNBC, Forbes.
As you can see, results for such debuts have been mixed. This is only a tiny sampling, and some of the other largest historical IPOs are companies that retail investors may not have heard of, like ENEL and Telstra (a point that doesn't bode well for large IPOs).
Can SpaceX bounce back?
Big, splashy IPOs don't necessarily lead to big gains, at least not immediately. Other than SpaceX, the only large IPOs that have become megacap companies are Meta and Visa, which are the seventh- and 16th-most-valuable companies by market cap in the U.S., respectively.
Over time, most large IPO stocks have come back from their early declines, but few of them have been the kinds of stocks that have minted millionaires. SpaceX may rebound over time, but you're likely to find better buys among lower-key IPOs that have great fundamentals.
Should you buy stock in Space Exploration Technologies right now?
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Jennifer Saibil has positions in Apple and Rivian Automotive. The Motley Fool has positions in and recommends Apple, Meta Platforms, Microsoft, Nvidia, Telstra Group, and Visa. The Motley Fool recommends General Motors. The Motley Fool has a disclosure policy.
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