Beyond the Hype: What the Coming Mega-IPOs Mean for Your Portfolio

5/14/2026 - By Michael C. Hall, CFP

A New Chapter for Public Markets

The financial press has been busy this year preparing investors for a wave of initial public offerings unlike anything we have seen before. SpaceX is reportedly targeting a valuation between $1.75 and $2 trillion. OpenAI and Anthropic are expected to price near or above $1 trillion each. By comparison, the largest Initial Public Offering (IPO) on record was Saudi Aramco in 2019 which listed at roughly $1.7 trillion. The largest U.S. exchange listing, Alibaba in 2014, debuted at ‘only’ $169 billion. If SpaceX prices where some are expecting, it would not only set a new record at IPO but would immediately rank among the ten largest publicly traded companies in the world.

For our clients, this raises a familiar question that we have heard many times before during market headlines of this nature: Should I own a piece of these companies on day one?

Our answer, as always, comes back to fundamentals of investing, not headlines.

What Does the Data Actually Say About IPOs?

It is easy to assume that getting in early on a well-known company is a winning strategy. Our memories are biased toward the success stories. But broad academic research, most notably the long-running database maintained by Professor Jay Ritter at the University of Florida, paints a more sobering picture.

Between 1980 and 2024, U.S. IPOs on average underperformed already-public companies of similar size and valuation by roughly 2% annually over the five years following their listing. That gap is not a one-year anomaly tied to insider lockup expirations (when restricted shares first hit the market). The underperformance persists well beyond the first 12 months.

Two well-known examples make the point. After Facebook (now Meta) went public in May 2012, the stock fell more than 50% over four months and took over a year to recover its IPO price. Uber followed a similar pattern after its 2019 listing. It experienced declines of roughly one third in the first five months and it was more than a year before it consistently traded above its offer price. Both companies provide services, then and now, which consumers use every day. Both still disappointed early investors.

Why does this happen so consistently? One factor is profitability. A meaningful portion of IPOs over the past four-plus decades have come to market with negative trailing earnings. When you list at a similar size and valuation to seasoned public companies but with materially lower (or negative) profits, theory and evidence both suggest lower expected returns. Public reporting on OpenAI and Anthropic, for instance, indicates each would currently fail traditional profitability screens used by major indexes.

The takeaway is not that all IPOs are bad investments. It is that price, profits, and equity all matter for IPOs and seasoned companies alike. A complete picture of the financials? is what informs whether a security belongs in a portfolio and at what weight.

The Index Wrinkle: Why This Matters Even If You Don't Buy IPOs Directly

Here is the part most investors miss. Even if you never place an order for SpaceX or OpenAI shares, these IPOs will likely affect your portfolio through the index funds you may already own.

S&P recently proposed dropping its long-standing requirement that companies trade publicly for at least 12 months before being eligible for the S&P 500 Index. For the largest 100 companies by valuation, S&P has also proposed eliminating the requirement of one full year of positive earnings. Russell, MSCI, and Nasdaq are evaluating their own rules. The clear direction of travel is toward including these mega-cap newcomers in widely tracked benchmarks sooner rather than later.

When a company is added to a major index, every fund tracking that index becomes a forced buyer. They must acquire shares quickly to continue replicating the benchmark. That demand has to be satisfied by non-forced sellers, who naturally require a price incentive to part with their shares. The result is a well-documented pattern: index funds often pay temporarily inflated prices on companies entering the index, and they finance those purchases by selling other holdings to make room.

For investors, this is a subtle but real cost embedded in pure index strategies. It is also one of the reasons we believe in approaches that are informed by indexes but not strictly bound to them. Strategies with flexibility in implementation can avoid buying at the moment of peak demand and can apply judgment around price, profitability, and the financial fundamentals that the academic record consistently rewards.

Our Framework: Same Discipline, Whether the Company Is New or 100 Years Old

The arrival of these mega-IPOs does not require us to invent a new investment philosophy. The same questions we ask of every holding apply here:

  • What is the price relative to the company's book equity and current profits?
  • What does the balance sheet and cash flow profile look like?
  • How does the expected return compare to other opportunities in the same size and style universe?

Companies trading at attractive prices relative to their financials have, on average and over long periods, delivered better outcomes for investors. That is true of the boring industrial firm that has paid a dividend for 60 years. It can sometimes be true of the splashy IPO with a household name. Headlines change quickly but fundamentals are durable and more reliable.

When SpaceX, OpenAI, or Anthropic eventually price their offerings, you will see the news coverage. You will see the first-day moves. You may see them sweep into indexes faster than companies have in the past. Our advice will be the same as it is today: focus on the fundamentals of good investing, not the fanfare.

Interested in how today’s market changes could impact your long-term investment strategy? The Saltmarsh Financial Advisors team can help you evaluate opportunities through a disciplined, fundamentals-based approach designed around your goals. Connect with our advisors to discuss your portfolio, risk tolerance, and long-term financial plan.

About the Author | Michael C. Hall, CFP®

Michael is a director for Saltmarsh Financial Advisors, LLC, an affiliate of Saltmarsh. With over 22 years of expertise in asset management and financial planning, he specializes in delivering comprehensive wealth management solutions that integrate asset management with tax planning and risk management. He works closely to ensure that each client’s financial goals are met with a comprehensive plan and strategies tailored to their unique risk tolerance, growth objectives, and overall financial well-being.

Sources & Further Reading

For readers who want to verify or go deeper on the data referenced in this piece:

On IPO performance and Professor Jay Ritter's research

On the S&P 500 index inclusion rule proposal

On historical IPO valuations

On April 2026 market performance

On wealth, well-being, and generational transfer

Source data for the April 2026 market figures referenced above is drawn from FactSet, Bloomberg, and Avantis Investors as of April 30, 2026.

---

*The information presented is for educational purposes only and should not be considered investment, tax, or legal advice. Past performance is no guarantee of future results. Index returns are unmanaged and do not reflect the deduction of fees or expenses. Investing involves risk, including the possible loss of principal. References to specific market data are sourced from FactSet, Bloomberg, and Avantis Investors as of April 30, 2026. Please consult your Saltmarsh advisor for guidance specific to your situation.*

*Saltmarsh Financial Advisors, LLC is a registered investment adviser. Saltmarsh, Cleaveland & Gund is a CPA firm affiliated with Saltmarsh Financial Advisors.*

 

Related Posts

Since 1944 Achieving Success by Contributing to the Success of Others