The IPO trap: why the hottest float is usually the worst place for your savings

Three weeks ago, SpaceX became a public company — the biggest float in history, raising about US$75 billion. Shares priced at US$135, opened higher, closed day one at US$160.95 (+19%), then ran to US$225.64 on 16 June with the company briefly worth more than US$2.6 trillion. A week later they were back at US$147, wiping out more than US$600 billion in value. They now sit around US$160, almost exactly where they closed on day one. Anyone who bought near the top is still down close to 30%. The common narrative said this was the chance you couldn't miss. In this episode, SortMe Resident Money Writer Hugo Jonston pulls apart what the research actually says about buying IPOs — and why the "hottest float" is usually the worst place for money you can't afford to lose. The pop you read about isn't the pop you get: that first-day gain went almost entirely to the large institutions allocated shares at the offer price the night before. By the time the shares hit your trading app, you're buying from *them*, often at the most expensive moment of the stock's life. SortMe Founder & CEO Carl Thompson: *"The hardest losses we hear about aren't from people who budgeted badly. They're from people who took money they'd carefully saved — a house deposit, a kid's education fund — and put it on one exciting bet because everyone said it couldn't lose. It almost always can."* In this episode: - The SpaceX round trip in three weeks — $135 offer, $160.95 first-day close, $225.64 peak, US$600B of value gone in a week, back to $160 today - Why the first-day pop mostly goes to the institutions who got the offer-price allocation the night before — and why your trading app only opens the door after the price has already re-rated - The Ritter research every retail investor should know — IPOs bought at first-day close returned ~34% over three years against ~62% for a comparable basket of established companies (about 29% behind); ~65% of IPOs underperform the market over their first three years - The floats don't even reliably hold their offer price — ~40% below offer in 2022, 54% below offer in 2023 - Three floats from the last twelve months, same shape — Figma ($33 offer → $115.50 day one → ~$23 now, down ~80% from day-one close and below offer); Klarna ($40 offer → $52 open → ~$20 now, half the offer price); Circle ($31 offer → $83.23 day-one close → nearly $299 peak → ~$69 now, three-quarters off the frenzy peak) - Why floats are sold at maximum optimism — that's when founders, early staff and VCs get the best price for the slice they're selling - The lock-up clock — 90–180 days after listing, insider selling hits the market, and around 60% of IPO stocks fall around lock-up expiry; the Facebook cautionary tale ($38 → below $18 as lock-ups rolled off in 2012) - What a calmer plan looks like — money you need within a few years sits boring; long-run money goes in steadily, spread across many companies, and left alone. It doesn't screenshot well, but it beats the rocket-stock approach for the overwhelming majority of people - Where SortMe fits — accounts, KiwiSaver, goals and net worth in one place, so a decision about risk is one you make with the full picture, not in the heat of a chart going vertical. A goal with a number and a date is much harder to gamble away on a Friday afternoon. Read the full article: sortme.com/post/buying-ipo-stocks-nz