IPO Market Heats Up Again: Should You Jump In?

‘There has always been, and will always be, windfall profits. At any point in time, certain people are being enriched unjustly because they get there very early.’

— Robert Wilson, Legendary Hedge Fund Manager

Remember when IPOs were actually exciting? When retail investors could get a piece of the next big thing?

Well, guess what — they’re back. The global IPO market just posted its best first half since 2021, with 539 companies raising US$61.4 billion.

That’s a 17% jump from last year, and the pipeline keeps filling up.

But before you start throwing money at every new listing, let’s see some of the results.

Because while the headlines scream ‘IPO boom,’ the reality on the ground is far more nuanced — and frankly, a bit brutal for the unprepared.

I’ve been watching three recent debuts closely: CoreWeave, Circle Internet Group, and yesterday’s Figma listing.

Each tells a different story about where this market’s headed, and more importantly, where the opportunities (and traps) lie for Australian investors.

Because getting in early can sometimes be a life-changing prospect.

But first, let’s start with the carnage, because that’s where the lessons are.

Gambling or Paitence: Choose one

CoreWeave came to market in late March with all the right buzzwords — AI infrastructure, Nvidia partnership, cloud computing.

The stock shot up like a rocket and is now crashing back to earth just as fast. We’re talking a 41% drop from the June peak. Ouch.

Those who first saw the opportunity are still happily up nearly 200%, while many of the late arrivals end up as bag holders.

Circle’s story is the same. A hot ticket sector that had retail investors chasing the dream. This is the company behind USDC, one of the biggest stablecoins in crypto.

When it IPO’d at US$31 in June, institutional investors went nuts. The stock hit nearly US$300 — almost a 10x return in weeks.

Today? It’s sitting around US$180, down 38% from those highs. In one particularly brutal week, it lost a quarter of its value.

Once again, the second wave of trading volume from the late arrivals often seems like a fantastic ride up — but then they’re the ones left in the red.

There are two lessons to take from these two examples:

First, you must acknowledge that early IPO buys look less like investing and more like gambling.

If you want to get in and out early, do it fast; waiting for confirmation often means you’re late for the party and the one left in the red.

However, just like gambling, remember that the house always wins.

These IPOs serve as a selling point for venture capitalists and seed investors. They have all the information—we have a prospectus and little public information beyond that.

Second lesson: The hype that follows these IPOs and the broader IPO market comes in waves.

For individual stocks, this can mean watching them as the hype dies down can net you great bargains.

Once the momentum traders move on, these stocks can be a great shopping ground for huge growth.

The opposite is true for the wider market, however. When IPO windows open, the highest-quality companies with the strongest fundamentals typically go public first.

As the wave continues, progressively weaker companies rush to market before conditions deteriorate. So, generally, the later the wave, the riskier the investments.

Of course, there are many other risks to consider with IPO investing, but I’ll put the warnings aside and instead offer an opportunity for readers who are still with me.

Yesterday, Figma [NASDAQ:FIG] entered the ring. The collaborative design software company that Adobe tried to buy for US$20 billion priced its IPO at US$33, well above initial expectations.

Overnight it closed at US$115.50. Not bad for day one. But this one could be a great little growth stock into the future.

What’s different about Figma? For starters, it actually makes money — US$44.9 million in profit last quarter.

Revenue’s growing at 48% yearly. And 95% of Fortune 500 companies use their product. That’s not hype; that’s a real business.

If Figma doesn’t excite you, then Stripe and Databricks are lining up for IPOs next. Both are likely to be huge — especially Stripe, which is now valued at around US$90 billion.

Just remember that huge expectations will also bring in huge speculation.

Risk it for the Biscuit?

So should Australian investors just sit these out? Hell no. But you need to be smart about it.

First, forget about getting rich quick. The best IPO investments often trade below their listing price before taking off. Amazon lost 95% of its value after the dot-com crash. Bought some then? You’re laughing now.

So, wait for the dust to settle. Let the day traders and momentum chasers duke it out in the first few weeks. Real opportunities emerge when the hype dies down and fundamentals matter again.

Third, do your homework. Really do it. Don’t just read the headline numbers — dig into the business model.

Does it make sense? Can you explain it to your mate at the pub? If not, walk away.

Finally, size your bets appropriately. Even Figma, with all its strengths, could easily drop 50% in this market. Can you stomach that? If not, you’re playing with too much.

The IPO market’s revival is real, and it’s creating genuine opportunities for investors.

But this isn’t 2020 anymore. The easy money’s gone. What’s left requires patience, discipline, and a strong stomach.

If you’re not interested in IPOs or international stocks, then here’s Australia’s equivalent.

Right now, mining companies are shaping up for another run — and four forces could be aligning to power this next wave.

Stay sharp out there.

Regards,

Charlie Ormond,
Editor, Alpha Tech Trader and Altucher’s Early-Stage Crypto Investor