Overhyped IPOs rarely make you money in the short term. That doesn't mean it's time to sell your stocks.
Hot IPOs like SpaceX are often priced for perfection - and many of them sink before they swim.
Mega-IPOs are poor investments. But overpriced IPOs don't tell you much about the broader market.
SpaceX stock, put simply, is not a good buy. And whenever OpenAI and Anthropic come to market with their highly anticipated IPOs, those shares won't be good buys either.
That distinction matters, because the commentary around these mega-IPOs has become lazy and predictable. The script is always the same: The valuations are absurd, the companies are unprofitable and public investors are exit liquidity for billionaires like SpaceX's Elon Musk and OpenAI's Sam Altman.
Therefore, the thinking goes, these mega-IPOs must signal the type of unhealthy, euphoric market you see near the end of a bull run.
That conclusion does not follow. But there is some truth to the criticism. SpaceX $(SPCX)$ currently is valued at $2 trillion. Except SpaceX is not profitable, posting a net loss of $4.9 billion for the full year in 2025. There were also some questionable dynamics around the listing itself. Exchanges and index providers appeared eager to get SpaceX into major stock-market benchmarks - and thus your retirement account - as quickly as possible. That matters because once a company is added to the Nasdaq 100 NDX and others, index funds become forced buyers regardless of valuation, creating an artificial second wave of demand following the IPO.
So yes, these deals are expensive, create exit liquidity for insiders, and reflect speculative appetite for risk. But history shows none of that means "the top" is in.
Priced for perfection
Mega IPOs are almost always bad short-term investments. Recent data compiled by Truist showed the average one-year drawdown for large IPOs was 55%. That's exactly why I told my Substack readers that I would not be buying the SpaceX IPO.
Source: Truist
Once the IPO hype cools and lockup periods expire, reality tends to show up in a hurry.
Hot IPOs are often priced for perfection, launched into maximum excitement and supported by a limited float that can temporarily distort the share price. And once the IPO hype cools and lockup periods expire, reality tends to show up in a hurry.
Mega-IPOs are poor investments. That much is clear. But overpriced IPOs don't tell you much about the broader market.
During the dot-com bubble, high-profile IPOs including Netscape, Amazon.com (AMZN), eBay $(EBAY)$ and others did not mark the top of the bull run. Instead, a speculative mania, excessive valuations and the Federal Reserve aggressively tightening policy pricked that bubble.
The same was true during the bull market of the 2010s. Meta Platforms (META), Alibaba Group (BABA) and Uber Technologies (UBER) did not mark the top of that cycle. We even had a trillion-dollar IPO in 2019 with Saudi Aramco (SA:2223). And while the bull run ended soon after, it was because of a once-in-a-generation pandemic, not because of an IPO boom or a speculative frenzy.
If anything, the market's ability to absorb these types of IPOs is a sign of strength, not weakness. The reason this distinction matters is that bull markets usually end because of broad excess and tightening liquidity - not because a few flashy IPOs come public at silly valuations.
That's the mistake so many commentators are making right now. They are taking a bad investment and trying to turn it into a macro signal. History shows those are not the same thing.
What actually ends bull markets
Today's valuations are nowhere near the nosebleed levels many bears would have you believe.
Historically, two things end bull runs. The first is some sort of "event" - like the COVID-19 pandemic or 9/11. The second is the Federal Reserve aggressively raising interest rates into high stock-market valuations.
That matters, because valuations alone do not kill bull markets. Expensive markets can stay expensive for a long time if earnings keep growing and liquidity does not tighten aggressively enough to break sentiment.
And that brings us to the most important point: This market still isn't euphoric.
The Nasdaq's forward price-to-earnings ratio is sitting right around its 10-year average of 23.5 times earnings. At the peak of the dot-com bubble, it was close to four times higher. And with profit margins for major technology companies at or near record highs, today's valuations are nowhere near the nosebleed levels many bears would have you believe.
More importantly, this bull run has been backed by earnings growth rather than multiple expansion. That is another crucial difference between the dot-com bubble and the AI boom. Unlike the recent mega-IPOs, the market's most important companies aren't priced on dreams and "eyeballs." They're delivering real revenue, earnings growth and operating leverage from AI, cloud computing and digital infrastructure.
Overpriced IPOs don't mark market tops
Heavy demand for SpaceX shares proves there's enough liquidity and risk appetite in the market to absorb it. That is a sign of a healthy market.
That still does not make these mega-IPOs good investments. After a brief euphoric post-IPO surge, SpaceX dropped below its $150-a-share initial trading price. The stock closed Wednesday at just over $154; it's been as high as $225.
Yet the heavy demand for SpaceX shares proves there's enough liquidity and risk appetite in the market to absorb it. That is a sign of a healthy market, not one drunk on euphoria. And considering the valuations and earnings growth we are seeing from the world's most important companies, there is still little evidence of true irrational exuberance.
So yes, avoid these mega-IPOs. I know I am. But don't confuse overpriced IPOs with a market on the verge of collapse.
Robert Ross is the founder of TikStocks and author of "A Beginner's Guide to High-Risk, High-Reward Investing" (Adams Media, 2022). A former chief equity analyst at Mauldin Economics, Ross writes the investment newsletter "Let's Analyze" on Substack and hosts the weekly "Room to Run" podcast.
Plus: Worried that big IPOs will torpedo the stock market? These factors suggest otherwise.
-Robert Ross
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June 26, 2026 18:34 ET (22:34 GMT)
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