SpaceX debut draws a crowd, but few recent hot IPOs outpace the market
SpaceX's upcoming IPO is generating significant interest, but historical data suggests that many recent high-profile IPOs have underperformed compared to the S&P 500. Investors who bought into these IPOs would have fared better by investing in the broader market. Despite the excitement surrounding SpaceX's valuation, analysts caution that high price-to-sales ratios often lead to disappointing returns for investors.
- ▪SpaceX is expected to debut with a valuation of US$1.75 trillion, significantly higher than previous IPOs.
- ▪Investors in recent IPOs have generally seen lower returns compared to the S&P 500, with only a few exceptions.
- ▪High price-to-sales ratios in IPOs are often associated with poor long-term performance.
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ShareSave for laterPlease log in to bookmark this story.Log InCreate Free AccountWall Street is abuzz with next month’s expected blockbuster debut of Elon Musk’s rocket and satellite maker SpaceX, but few of the biggest IPOs in recent years have paid off for investors who bought in when the deals came to market.Reuters analysis of the 50 IPOs with the highest valuations in the past five years shows that investors would have been better off buying an S&P 500 index fund about three-quarters of the time. The data underscores the difficulty of finding bargains among companies whose valuations have often surged long before the stock’s debut.An investor who bought each of the IPOs tracked by Reuters would be up an average of 27 per cent through May 21.
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