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LivestreamMenuHistorical data suggest that major IPOs don’t usually flag a bull market peak in the year that follows. SpaceX is poised to launch the biggest IPO ever when it begins trading this Friday. But a recent analysis from Canaccord Genuity shows that broad stock market averages typically tend to outperform big IPOs after a year. “Recent history suggests large IPOs are not a headwind for index performance,” the Canaccord analysts wrote. The investment bank reviewed the historical impact of the largest global listings since 2008, including seven IPOs that raised the largest dollar amounts of capital globally: Visa , Facebook , Alibaba , Aramco, Rivian , LG Energy Solution and ARM Holdings . Historical impact Historical data analyzed by Canaccord Genuity showed that, on average, the Nasdaq Composite gained 10.9% one year after the mega-sized IPOs, while S & P 500 rose a more modest 1.1%. Notably, index returns outpaced the IPOs themselves, which were down 4.2% on average over the same period. Most of the seven IPOs declined in their first year of trading, for example. Facebook, Alibaba, Aramco and Rivian also suffered sharp losses. Arm was the major exception, more than doubling, with a 132% gain. The Nasdaq rose over the following year after five of the seven jumbo IPOs, including gains of 42.2% after Facebook’s 2012 IPO; 41.8% after ARM Holdings went public in 2023; and 20.3% one after Saudi Aramco’s 2019 debut. The biggest one-year decline came after Visa’s IPO in March 2008, which preceded the Global Financial Crisis. Over the next year, the Nasdaq collapsed 44.3% and the S & P 500 by 39.6%. Largest IPO ever SpaceX, led by CEO Elon Musk, plans to debut on Nasdaq on Friday. The expectation is the rocket company will raise $75 billion by selling 555.6 million shares at a price of $135 per share, the largest IPO ever on Nasdaq. The Nasdaq market recently made some changes this year , which could make it easier for IPOs such as SpaceX to enter the benchmark Nasdaq-100 index. When that happens, investors using the Invesco QQQ Trust ETF to buy the Nasdaq-100 will also own a slice of SpaceX. By contrast, S & P Global recently blocked a rule that would have allowed SpaceX to quickly join the S & P 500. The momentum of the recent stock rally has created investor anxiety about the sustainability of the bull market, and concerns that the peak may be near. “Speculative mania is a poor timing indicator,” but it remains one of the hallmarks that has characterized the tops of highly-valued, highly-concentrated bull markets in the past, according to Goldman Sachs chief U.S. equity strategist Ben Snider in a report published late Friday. Instead, market dynamics that have marked the ends of similar bull markets in the past have included disappointing growth, elevated equity issuance and tightening Fed policy. “None of these conditions describe the environment today, but each appears closer than it did just a few months ago,” a group of strategists led by Snider wrote. In fact, Goldman highlighted one optimistic historical footnote. When former Fed Chair Alan Greenspan “famously gave his speech referencing ‘irrational exuberance’ in December 1996,” stocks continued to run for more than three years before finally peaking in March 2000.Read More
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