The buzz around SpaceX's massive IPO has investors dreaming of first-day gains. That opening pop attracts attention for good reason - it's historically where IPO buyers capture the biggest returns. Data from University of Florida's Jay Ritter shows the average U.S.-listed IPO jumps 19% from offer price to closing bell on day one.

But that excitement fades quickly for most market participants. While those lucky enough to buy at the offering price benefit from immediate appreciation, the typical retail investor faces a different outcome. Buying shares after that first-day surge and holding for three years produces returns roughly 21% below what a value-weighted market index would generate.

This pattern holds across nearly 9,300 IPOs from 1980 through 2024. Even when narrowing the lens to larger companies, the underperformance persists, though the gap narrows somewhat. The math favors institutional investors and insiders who secure allocation at the initial price point.

For the broader investing public, IPO enthusiasm often proves costly. The historical record suggests that chasing hot new issues rarely compensates for the premium paid above the offering price.