#MARKETS & INVESTING
A company going public makes headlines and pops 19% on day one, on average. Five years later, most investors who followed it have lost money.
Published on August 20, 2026
Jay Ritter, a professor at the University of Florida, maintains the largest academic database on the long-run performance of U.S. initial public offerings. Across 9,195 operating-company IPOs from 1975-2021 (returns calculated through the end of 2025), the first day of trading returns an average 18.7%. But five years after the IPO, measured from the offer price and including dividends, 39.7% of these IPOs had lost more than half their value and another 17.4% had lost some of their stake without exceeding that half — 57.1% in total loss. The average return across the whole sample stays positive (+57.2%), but that's misleading: it's pulled up by a handful of huge winners, while the median return is −22.1%.
How can a positive average return coexist with a majority of losers?
Because the distribution of returns is highly skewed: a handful of IPOs multiply their value several times over (more than 3,000% for a few), which is enough to pull the sample average up, while the majority of cases sit in negative territory — that's the whole gap between a mean and a median.
In other words: the “average” IPO doesn't really exist: there's a small number of huge winners skewing the mean, and a majority of investors who, five years after following the IPO, are showing a loss.
Three caveats, because they matter
- Sector changes the picture a lot: over 1980-2024, tech IPOs show a market-adjusted 3-year return of +15.6%, versus −13.9% for non-tech IPOs.
- This figure starts from the offer price, available only to investors who get shares before trading begins. An investor who buys only at the first day's opening misses the average +18.7% first-day pop, which would further reduce their relative return.
- The sample excludes IPOs priced under $5, SPACs, REITs, closed-end funds, banks and small best-efforts offerings — a slight bias toward more significant IPOs.
Why it still matters: following an IPO because it's in the news, without looking past the first day of trading, amounts to betting on a scenario where most precedents ended in a loss five years later.
For you
- Have you ever invested in an IPO because it was making headlines?
- Do you look at the average return or the median return before judging an asset category?
Source: Jay R. Ritter, “Initial Public Offerings: Updated Long-run Statistics”, University of Florida, Table 16e (March 23, 2026), 9,195 U.S. IPOs 1975-2021, returns calculated through December 31, 2025.
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