Why Most 'Can't-Miss' IPOs Will Fail
Anthropic, Databricks, and other glittering private companies are planning to go public, fueling investor dreams of quick wealth. However, history warns that buying shares at an IPO often leads to disappointment rather than joy.
Anthropic, Databricks, and other glittering private companies are planning to follow in SpaceX's footsteps and take their shares public, and many investors are fantasizing about getting rich quick. But be warned: history teaches that buying shares at an IPO usually leads to more disappointment than joy.
In Israel, too, there has recently been a buzz around IPOs. The Smart Shooter IPO in March is raising expectations for further IPOs on the Tel Aviv Stock Exchange. Possible IPOs for Rafael and Israel Aerospace Industries are also fueling enthusiasm, but security challenges and regulatory uncertainty are casting a shadow over both and cooling expectations.
The main enthusiasm for IPOs is concentrated in American technology companies with ties to artificial intelligence. Why now? Sentiment toward tech and AI stocks has been hot for many long months. Founders and early investors are looking to take advantage of the window of opportunity and make the most of the IPO, while market enthusiasm pushes valuations upward. Herein lies the tension: founders want to sell at a high price or raise capital at a high valuation, while stock buyers want to buy at the lowest price possible. Who knows better what the true value of the company is? Add to that the marketing hype generated by investment banks, and you will understand why I have been arguing for years that IPOs are usually overpriced.
Think about it: eToro shares, which originated in Israel, have plummeted 50% from the peak price they soared to after their IPO in May 2025. Natus Pharma shares have fallen 68% since the end of their first trading day in August 2025. Even "successful" IPOs require almost perfect timing. Nevan shares, founded by Israeli entrepreneurs, plunged 59% from their closing price on their IPO day in October 2025 to the end of March. Despite the sharp gains recorded since then, it is still lagging behind the TA-35 index since the IPO. Smart Shooter shares have fallen 14% since their IPO day in March, and have continued to show sharp volatility since.
Do you really know how to time the stock market? Only a few succeed at it. Looking more broadly, since 1990, 52% of US IPOs have lagged behind the S&P 500 index in the very first month by a median gap of 0.3 percentage points (in dollar terms). After three months, 60% of IPOs were already lagging by a median gap of 5 percentage points. After six months, 63% of them lagged by 11 percentage points. After one and two years, the rate of IPOs that lagged behind the index approaches 70%, with median gaps of 20 and 35 percentage points, respectively. Not encouraging data. And what about SpaceX? After its initial surge, it wiped out almost all the gains, and today its return is similar to that of the S&P 500 index since the IPO.
Beware of hubris. Believe in the long-term potential of current market darlings? Excellent. But is this potential reflected in the three-to-30-month horizon, where most investors evaluate stock performance? Probably not. The most attractive entry points usually come at a later stage, after the hype subsides. Nevan's recovery since March is a good example of this. Even today's glittering names do not change the picture. Suffice it to recall what happened after the Facebook and Uber IPOs. Ask yourself: what do you know about these IPOs that the entire market does not know? And if you happened to profit by luck, will you also know when to sell? Here too, only a few really know how to time the market.
Note that none of the legendary investors sell based on a strategy of buying IPOs. The reason is simple: jumping in and out is not investing. Real investing requires research, judgment, patience, and discipline. It is not a get-rich-quick scheme. So beware of overconfidence. If the stock you bought at an IPO soars, the feeling is great. But history teaches that trying to repeat this success time and again usually works against investors. Although markets are not yet in euphoria, the AI and technology sectors are already signaling excessive enthusiasm. When expectations are too high, it is hard to surprise to the upside. In such a situation, stocks outside the US and non-tech companies may offer better opportunities. Do not be tempted by the hype around IPOs.
Ken Fisher is the founder and chairman of Fisher Investments, one of the world's largest independent money management firms, which manages over $236 billion for individuals, families, and institutions. The firm currently has more than 145,000 clients, including some of the world's largest investors.
