Mega-IPOs Are Coming: What Every Investor Should Know
- Holzberg Wealth Management
- May 28
- 9 min read
HWM Market Recap - May 2026
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The investment world is buzzing about a trio of high-profile private companies expected to go public in the near future: SpaceX, OpenAI, and Anthropic.
What’s unusual about these listings isn’t just the brand recognition – it’s the sheer scale of the expected valuations. SpaceX is reportedly targeting a valuation of $1.75 to $2 trillion, while OpenAI and Anthropic are both expected to price their IPOs at valuations near $1 trillion or more. If SpaceX were to go public today at a $1.8 trillion market cap, it would be the largest IPO in history by total market cap and the eighth-largest publicly traded company by market cap. To contextualize the scale of these IPOs, Saudi Aramco holds the record for the largest IPO by total valuation in the world, at $1.7 trillion, when it went public on the Saudi Exchange (Tadawul) in 2019. Alibaba holds a separate record for the largest IPO specifically on a U.S. stock exchange, listing on the New York Stock Exchange in 2014 at a market cap of about $169 billion. SpaceX will likely list on a U.S. exchange, where it could beat both of those records and land in the top 10 of the world’s largest publicly traded companies on day one.
The chart below compares SpaceX’s potential $1.8 trillion IPO with Saudi Aramco’s 2019 IPO at $1.7 trillion, Alibaba’s 2014 IPO at $169 billion, and the current market caps of Nvidia ($4.8 trillion), Amazon ($2.9 trillion), and Meta ($1.5 trillion) as of April 30, 2026.
SpaceX Could List at a Similar Size to Some of Today’s Largest Companies
Data as of 4/30/2026. Sources: Avantis Investors, Bloomberg, Reuters. Nvidia, Amazon, Meta market capitalization figures as of 4/30/2026. Saudi Aramco and Alibaba market capitalizations are at the time of their respective IPOs. SpaceX market capitalization is an anticipated level for its expected IPO in late 2026. Illustration designed by Avantis Investors.
Should Investors Include IPOs in Their Portfolios?
It’s easy to see why there’s excitement when a well-known company announces plans to go public. For many everyday investors, an IPO represents the first chance to own a piece of a business they’ve watched grow for years. But whether that excitement translates into strong investment returns is a very different question.
Consider two of the most talked-about IPOs of the past two decades: Facebook (now Meta) and Uber. Both companies had massive, loyal user bases and dominated headlines when they went public. Yet neither rewarded early investors the way the hype suggested they would. In the four months following Meta’s May 2012 IPO, the stock dropped by more than 50%, and it took over a year to claw back to its original offering price. Uber followed a nearly identical path, shedding about a third of its value in the first five months before stabilizing above its IPO price more than a year later.
These stories aren’t exceptions. A broad body of academic research spanning decades confirms that, on average, IPOs have historically underperformed comparable companies that have been publicly traded for years. One common explanation points to insider “lockup” periods – agreements that prevent company founders, executives, and early investors from selling their shares until typically at least six months after the IPO. When those restrictions lift, a wave of new shares can hit the market, creating selling pressure that weighs on the stock price.
But the underperformance doesn’t stop when the lockup expires. Research covering U.S. IPOs from 1980 through 2024 shows that the average IPO trailed its peers of similar size and valuation by roughly 2% per year on an annualized basis over the full five years after listing. The lockup expiration may contribute to some early weakness, but it doesn’t account for the longer-term pattern.
The data below compares the average annualized returns of U.S. IPOs with those of non-IPO companies with similar market caps and book-to-price ratios across multiple periods following the IPO date.
U.S. IPOs on Average Underperform Companies of Similar Size and Valuations in the First Five Years After Listing
Returns over Periods Post-IPO (1980-2024)
Data from 1/1/1980 – 12/31/2024. Source: Jay Ritter, “Initial Public Offerings: Updated Long-Run Statistics,” Warrington College of Business, University of Florida, March 23, 2026. Past performance is no guarantee of future results. Illustration designed by Avantis Investors.
So if it’s not solely the lockup period, what does account for this underperformance? A big part of the answer comes down to profitability, or lack thereof. Many companies go public before they’re profitable, and companies with weaker earnings profiles generally carry lower expected returns. In other words, a newly listed company might look similar to an established public peer on paper, but if it’s still burning cash, that comparison is misleading, and helps explain why IPOs tend to carry lower expected returns than their size and valuation alone would suggest.
The chart below shows the percentage of IPOs with negative trailing twelve-month earnings for each calendar year since 1980, indicating that many IPOs were likely listed at sizes and book-to-price ratios similar to those of older public companies but with much lower profitability, implying lower expected returns.
A High Percentage of IPOs Are Unprofitable
Percentage of U.S. IPOs with Negative Trailing 12-Month Earnings (1980-2025)
Data from 1/1/1980 – 12/31/2025. Source: Jay Ritter, “Initial Public Offerings: Updated Statistics,” Warrington College of Business, University of Florida, April 14, 2026. Illustration designed by Avantis Investors.
The takeaway isn’t that every IPO is a bad investment. It’s that the full financial picture – price, equity, and profitability together – matters far more than the brand name or the buzz surrounding the listing date.
How Are Index Providers Responding, and How Could It Affect Investors?
Behind the headlines about SpaceX, OpenAI, and Anthropic going public, there’s a quieter but equally important story playing out among the firms that manage the indexes millions of investors track and invest in every day. Index providers are still evaluating how, and how quickly, to absorb companies of this size into their benchmarks, and the decisions they make will have real consequences for everyday investors.
The most significant proposed change comes from Standard & Poor’s (of the S&P 500). For decades, a company had to trade publicly for at least twelve months before it could be considered for inclusion in the S&P 500. S&P is now proposing to drop that requirement entirely. On top of that, for companies that rank among the 100 largest by valuation, S&P is also proposing to waive its longstanding rule requiring one full year of positive profits before joining the index. The profitability requirement would remain in place for smaller companies outside the top 100.
To understand why that second change matters, consider Tesla. Despite going public in 2010 and growing into one of the largest U.S. companies by market cap, Tesla was kept out of the S&P 500 until 2020, a full decade, precisely because of the profitability screen. Under the proposed new rules, that kind of prolonged exclusion would no longer apply to the largest companies. Based on what’s publicly known about OpenAI and Anthropic’s finances, neither would likely clear the current profitability bar – meaning without these rule changes, both could face a similar wait.
S&P isn’t alone in reassessing its approach. Russell, MSCI, and Nasdaq are all currently evaluating their own index rules in light of these expected listings. The exact timing and mechanics of how each provider will handle inclusion, and what weight these companies will carry within each index, are still being worked out.
What this means practically for investors is that when a company is added to an index, every fund that tracks that index is essentially required to buy shares, and to do so quickly. That creates a predictable surge of demand at a moment when the supply of available shares may still be limited. The result can be temporarily inflated prices, and index funds that are obligated to buy at that moment end up locking in those elevated costs. Compounding the effect, adding a large new company to an index also means existing holdings must be trimmed to make room, so the disruption ripples across the portfolio rather than just at the point of entry.
For investors in actively managed or factor-based strategies that aren’t bound by index methodology, this dynamic can actually work in their favor. Without the obligation to buy on a specific timeline, these strategies can sidestep the liquidity-driven price spike, wait for a more favorable entry point, or choose not to invest at all if the fundamentals don’t support it.
The Bottom Line
Big names going public naturally attract big media coverage. That doesn’t make them good investments. The historical evidence is clear: IPOs, on average, underperform comparable companies for years after listing, and many go public while still losing money.
As long-term investors, we should not let hype stop us from evaluating the merits of these opportunities through a sound framework. Whether we are evaluating IPOs or companies that have long traded in the public markets, those with attractive prices relative to their financials are expected to do better over the long term.
Investors whose portfolios aren’t rigidly tied to index benchmarks have a meaningful edge in moments like these. Non-index-based strategies can make their own buy-and-sell decisions based on fundamentals and timing, rather than being locked into whatever an index provider mandates. Index-tracking funds, by design, don’t have that freedom – they must follow the index’s methodology, which means buying and selling on the index’s schedule regardless of whether prices are favorable at that moment. When mega-cap IPOs enter the picture, that lack of flexibility can be a real cost. We believe all these factors should be weighed when constructing your portfolio.
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Interest Rates: The Federal Open Market Committee (FOMC) did not meet in May. Their next meeting will be on June 17th.
Inflation: The Consumer Price Index (CPI) increased 0.6% month-over-month in April. Over the last twelve months, CPI increased 3.8%. Core CPI (which excludes food and energy) increased 0.4% in April compared to March and rose 2.8% compared to a year ago.
Housing: According to the National Association of Realtors, existing home sales increased 0.2% month-over-month in April and was unchanged from one year ago. The median existing-home sales price rose 0.9% from April 2025 to $417,700. Sales of new single-family houses increased 7.4% in March from February and rose 3.3% from March 2025. The median sales price of new houses sold in March was $387,400 – a 6.2% decrease from a year ago.
Mortgage Rates: As of May 21st, 2026, the weekly average for a 30-year fixed-rate mortgage is 6.51%, above the 52-week average of 6.36% and down 0.35% from a year ago.
Employment: According to the Bureau of Labor Statistics’ Employment Situation Summary, unemployment was little changed in April at 4.3%. Job gains occurred in health care, transportation and warehousing, and retail trade.
Consumer Sentiment: The University of Michigan’s Surveys of Consumers dipped 10% in May – the third straight month of falling consumer sentiment. Compared to its reading from one year prior, consumer sentiment is down 14.2%. Year-ahead inflation expectations inched up from 4.7% in April to 4.8% in May. Long-run inflation expectations climbed from 3.5% in April to 3.9% in May.
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About the Author
Holzberg Wealth Management is a family-owned and operated financial planning and investment management firm based in Marin County, CA. As your financial advisors, we serve you as a fiduciary and are fee-only, so we never receive commissions of any kind. We help individuals and families like you in the greater San Francisco Bay Area and nationwide with the financial decision-making process to organize, grow, and protect your assets.
** This writing is for informational purposes only. The author and Holzberg Wealth Management do not guarantee or otherwise promise any results that may be obtained from using this report. No reader should make any investment decision without first consulting their financial advisor and conducting their own research and due diligence. These commentaries, analyses, opinions, and recommendations represent the personal and subjective views of the author and do not constitute a recommendation, offer, or solicitation to make any securities transaction. The information provided in this report is obtained from sources that the author believes to be reliable. External links to third parties are being provided for informational purposes only. Holzberg Wealth Management is not affiliated with the third-party websites linked to, unless otherwise explicitly stated, and does not constitute an endorsement or approval by Holzberg Wealth Management of any of the third party’s products, services, or opinions. Past performance is not a guarantee of future results. Indices are not available for direct investment; therefore, their performance does not reflect the expenses associated with the management of an actual portfolio. Any charts and graphs provided are hypothetical and for illustrative purposes only, are not indicative of any investment, and assume reinvestment of income and no transaction costs or taxes.
