If you wanted SpaceX at its IPO price, you probably didn’t get any. It was well over-subscribed – lots of buyers, not enough sellers. So most people who wanted it bought it when trading started, on or after 6/12.

The IPO price was $135. The first closing price on 6/12 was $161. On its third day it peaked at $225. As we write this at 10:47am on July 21, the price stands at $127.

The good news is that if you were dragging your feet on buying it, now you’ll get a nice discount!

We sincerely hope that anyone who got caught up in the hype makes a ton of money. We’re just here to talk about the hype. If the hype were water, you could’ve flooded earth with it. And it delivered! Albeit briefly. SpaceX was the largest IPO ever, by a mile. It raised $75 billion, well over Aramco’s $25 billion, now the second largest. It made millionaires out 4400 employees – easily the best part of the story.

Five weeks later, SpaceX is trading below its IPO price, and 43% below the high on 6/16. We’re not surprised. After an initial bump from an IPO price, most IPOs do poorly. Consider this: If you were to buy all US IPOs on the first day of trading and held them for one full year, that IPO portfolio over the last twenty years would’ve returned about 5% annually, compared to about 10% for the broad market (Russell 3000). Ouch.

(Nerd note: key drivers of underperformance largely explain this disparity: small growth, low profitability, and high investment. Most IPOs check all three boxes.)

It seems the hype hasn’t been exclusive to SpaceX. But lessons are tough to learn in investing. Whoever first said “history repeats itself” was probably studying the stock market.

Stay diversified, patient and disciplined, and expect success.

Good luck to all you Musketeers!

Cheers,

Your Great Oak Team