Periods of market optimism often revive interest in initial public offerings (IPOs). Investors may view IPOs as opportunities to participate in innovative businesses early in their public life. In practice, however, the IPO process has multiple signals that can be hard for investors to gauge.
Understanding how IPOs are priced, why early trading can be distorted, and where risks typically emerge can help investors evaluate these opportunities more objectively.
How the IPO Process Works
Before a company goes public, it works with investment banks (underwriters) to market the offering. A key step is the “roadshow,” during which company management presents the business to large institutional investors such as pension funds, mutual funds, and hedge funds.
These meetings help underwriters assess demand, how many shares investors want, and at what price. Based on this feedback, the company and its underwriters set the IPO price in the primary market, not a stock exchange, where public shares are sold to its first investors.
Retail investors typically participate only after trading begins in the secondary market, often at prices that already reflect early demand dynamics.
Why IPO Stocks Often Spike Early
Strong demand or headlines can push a newly public stock well above its IPO price on the first day of trading. While this can appear to confirm success, early price movements are often driven by supply constraints rather than fundamentals.
IPOs include a lock-up period, typically ranging from 90 to 180 days, during which insiders such as founders, employees, and early investors are prohibited from selling their shares. New market practices have been introduced in 2026, however, which allow for much shorter lock-up periods in some cases. Instead of a single “expiration date”, select insiders and early investors can sell their shares based on stock performance or earnings results. Taken together, only a small portion of the total shares, typically 10%–20%, is available for public trading for up to 6 months. This limited supply, combined with strong demand, can drive prices higher even if the company’s long-term earnings outlook does not fully support the valuation.
Lock-Up Expiration and Price Volatility
When lock-up periods expire, many shares may become eligible for sale at the same time. Many early investors, employees, and venture capital firms acquired their shares at significantly lower valuations and may be looking to realize gains by partially or fully exiting their positions. If demand is insufficient to absorb this new supply, the resulting selling pressure can lead to heightened volatility and downward pressure on the stock price.
Here are two examples of this risk materializing:
Example 1: Bullish (BLSH), 2025
Bullish, a cryptocurrency exchange and owner of CoinDesk, went public in August 2025, pricing its IPO at $37 per share and valuing the company at roughly $5.4 billion. On its first day of trading, the stock surged to $118 per share, briefly more than tripling its valuation as demand overwhelmed a limited public float. This sharp move reflected IPO dynamics: strong investor enthusiasm paired with a relatively small number of shares available for trading.
As of August 26th, 2026, Bullish is trading roughly 20% below its IPO price of $32 and nearly 65% below its opening price of $90. This reinforces the idea that early post-IPO performance can be misleading, and prices often reset as supply increases and expectations adjust. For long-term investors, patience and fundamental analysis tend to matter far more than first-day momentum.
Example 2: Beyond Meat (2019)
Beyond Meat provides a clear illustration of this dynamic. After its IPO in May 2019, the stock surged, reaching intraday highs above $230 later that year. When its lock-up period expired on October 29, 2019, tens of millions of shares, representing roughly 80% of the outstanding shares, became eligible for trading. The stock declined sharply as early holders were able to sell, regardless of the underlying business. As of August 26, 2026, shares of Beyond Meat are trading nearly 90% below their IPO price and recently completed a 1-for-30 reverse stock split on August 14th, 2026, to regain compliance with the NASDAQ minimum $1 per share price (30 shares converted to 1 share).
2026 IPOs
Interest is already building around many companies that have announced or are expected to announce their IPOs this year, particularly in technology and artificial intelligence. It is important to remember that until a company files publicly, timing, financial health, and valuation remain speculative.
SpaceX IPO – SpaceX started trading on June 12th at $150 per share, 11% above the listed IPO price of $135, valuing the highly anticipated company at a record $1.75-$1.77 trillion. Shares closed at $160, up nearly 19% from the IPO price, despite reaching a 30% intraday increase. As of August 26, shares are trading roughly 7.5% below the IPO price, around 8.5% from its opening price of $150, and 39% below its highest traded price of $225.64 on June 16th and have traded with elevated volatility.
Interest continues to build around several high-profile private companies that may pursue public listings, particularly in technology and artificial intelligence. Until a company publicly files its registration statement, however, its timing, financial condition, and potential IPO valuation remain subject to change.
Other frequently discussed candidates include:
OpenAI – The developer of ChatGPT closed a record $122 billion funding round in March 2026 at a post-money valuation of approximately $852 billion. The company is reportedly preparing for a potential IPO, although estimates now range from late 2026 into 2027, and no firm listing date has been announced publicly.
Anthropic – The developer of Claude raised $65 billion in May 2026 at a post-money valuation of approximately $965 billion, more than doubling its valuation from February. Anthropic is actively preparing for a public listing, with reports suggesting it could list before the end of 2026, though timing and valuation remain contingent on market conditions and are at the company’s discretion.
Databricks – The data and AI platform closed a $5 billion funding round in August 2026 at a $190 billion valuation, up from $134 billion six months earlier. Management has indicated that the company still intends to go public eventually but is currently choosing to remain private, making a 2027 listing appear more likely than an IPO in 2026.
Canva – The global design platform was valued at approximately $42 billion in a 2025 employee share sale, although some investors have reportedly reduced their internal valuations to around $35 billion amid stronger AI competition and slower expected growth. Canva has taken several steps associated with IPO preparation, including establishing a U.S. parent company, but has not publicly filed or announced a firm listing date and for right now, IPO talks seem to be primarily rumors.
A Long-Term Perspective
Fear of missing out (FOMO) can be especially powerful during IPO cycles. Retail investors may feel pressure to “get in early,” even though early trading is often dominated by institutions and insiders who acquired shares at significantly lower prices in private markets.
For long-term investors, discipline matters. Valuation, profitability, cash flow durability, and alignment with broader portfolio objectives are more reliable guides than early price momentum. Many high-growth IPOs remain volatile for years, particularly if profitability is uncertain.
