‘Very difficult’ for casual investors to gain with IPOs – why you should think twice about SpaceX, Anthropic and OpenAI

Wall Street loves initial public offerings (IPOs), seeing them as a coming-out party for stock market debutants making their big transition into public trading.

But that’s not always the case for retail investors, who often get short shrift on IPO day.

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For example, Pets.com (1) was a victim of the 2000 dot-com crash. Despite a $300 million public funding injection and a moderate $11-per-share trading price, the company filed for bankruptcy and liquidated its assets within 269 days. It sent scores of investors to the sidelines with their pockets empty.

More recently, Robinhood Markets’ [NASDAQ:HOOD] 2021 IPO saw the digital micro-trading platform’s shares fall by 8% on its first day of trading, leaving many investors empty-handed.

Retail investors tend to get shut out of the best IPOs and the best prices, and that’s by design, market mavens say.