IPO Fever Is Back: What the SpaceX Hype Is Not Telling You

The IPO Machine Has Always Been Rigged

I have been on show after show over the past few weeks and the questions are always the same. SpaceX, IPOs, what should I buy, how do I get in. And every single time I have to pump the brakes and bring people back to reality.

I started my career in investment banking placing IPOs. One of my actual jobs was cold calling CEOs using Dun and Bradstreet cards, dialing for dollars, and collecting what are called indications of interest. You would mention the word IPO to a secretary and say you were calling from an investment bank, and the CEO would pick up the phone immediately. That is how electric the word was. Everyone wanted in.

But here is what I observed in a very short period of time. The whole system was a massive racket.

How the Game Was Actually Played

Here is how it worked behind the scenes:

• Big institutional players controlled allocation. If you wanted a piece of an IPO, you had to commit to doing more business with the investment bank.
• Retail investors who actually got shares received a tiny, token allocation. Not enough to matter.
• Those same investors were often encouraged to buy more shares in the aftermarket, meaning after the stock had already popped.
• They were also nudged to hold and not sell. Most did. That was usually a mistake.
• The insiders had lockup periods, and once those expired, they sold. The stock would eventually come back down to earth.

The game was structured to benefit the banks and the institutional clients. Retail investors were sprinkled in just enough to feel included.

The SpaceX Example Proves Nothing Has Changed

SpaceX is reportedly shaping up to be one of the largest IPOs in history. BlackRock alone is reportedly committing around five billion dollars to this deal. When you have players like that writing checks that big, what do you think happens to the retail allocation? It gets cut. Simple math. The big money says they want more, and they get more. The everyday investor gets table scraps, if anything.

This is not about whether SpaceX is a great company. It might be. Elon Musk has built something genuinely impressive. But that is not the question. The question is whether the IPO structure actually benefits you as an individual investor.

What the Historical Data Actually Shows

I want to give credit to a Wall Street Journal reporter who actually did some real journalism and tracked down a finance professor at the University of Florida who has compiled serious research on IPO performance. This professor has done work we have cited before on this program, and the numbers are not flattering for IPO investors.

When you look at how IPOs have historically performed over time, the pattern is remarkably consistent:

• Short term pop upon opening day, driven by hype and limited supply.
• Institutional selling once lockup periods expire.
• Long term underperformance compared to the broader market in a significant number of cases.

The excitement of getting into a hot deal feels like an opportunity. But the structure of how these deals are built, who gets the best allocations, and what the historical return data actually shows paints a very different picture.

The Bottom Line on IPO Investing

I am not saying every IPO is garbage. Some have been exceptional long term investments. But chasing the hype of a flashy name before the data is clear, before the company has a public track record, and after institutional giants have already locked up the best entry points, that is a losing strategy for most individual investors.

Reality is a good thing when it comes to investing. The SpaceX excitement is real. The hype is real. But the numbers tell a story that the Wall Street marketing machine would prefer you never read.