2025 has undoubtedly been a very bullish year, and the S&P 500 seems quite expensive, although not really, but I'll talk about that another day. When the stock market experiences several consecutive years of gains, IPOs tend to proliferate like mushrooms in autumn. And that should put us on alert as investors. This is because, in general, IPOs are not usually a good investment idea.
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Why do I say that IPOs are not usually a good investment? There are several reasons. The first is that nobody takes their company public when the stock is falling; they do it when it's rising and valuations are high. So, the most likely outcome is that we'll pay a premium. When an IPO takes place, it's like a Black Friday sale; everything seems like a bargain, but the reality is that the underwriter is highly motivated to sell the product at any cost. This can lead us to a misconception.
It's possible that some IPOs might be a bargain—there are many examples throughout history—but history also teaches us that most are bad deals best avoided. 2026 will be full of IPOs, especially in the tech sector, promising immediate financial freedom, but my advice is to carefully examine the numbers and not speculate based on wishful thinking. For that, you'd be better off at the casino.
Disclaimer.
This is not a purchase recommendation. I am not a regulated financial analyst. Under no circumstances should this information be construed as a recommendation to buy, sell, or hold a position.
You should be aware of the risks involved in investing and conduct your due research.
The information described here may not be accurate or may change at any time, so you should always check it.