IPO excitement in the US​

In the wake of the SpaceX IPO (initial public offering) in June – the biggest in history – Matt Brennan, Head of Asset Allocation, notes that not all IPOs soar to new heights.​
 

Key points​

• The long-term success of SpaceX’s record-breaking IPO will depend on elements like operational delivery and market conditions​
• Recent large IPOs show mixed outcomes​
• Diversification remains important​

SpaceX​

SpaceX listed on the Nasdaq Index and raised over US$85 billion for around 5% of the business, which gave it an overall implied valuation of over US$1.8 trillion, making it one of the world’s largest companies by market capitalisation. The listing was undertaken to raise money to help grow the business as it looks to make further moves into space, satellites and even AI. Demand for shares was such that on the Monday after its IPO, its stock price jumped 19%. ​

Of course, things might not continue that way, and the success or otherwise of SpaceX will be judged by how it performs over the coming months and years, both operationally and in terms of share price progression. The vagaries of wider markets, geopolitics and national and global economics may also determine how this performs to a large extent in coming years.​

Many will remember the rash of IPOs during the ‘dot com’ bubble of the late 1990s and early 2000s, and how things turned sour when the bubble burst and the share prices of companies, many with little track record, were re-evaluated. 

Many shifted from highly valued strong stock-market performers to quickly seeing their share prices tumble. 2026 is already shaping up to be a huge year for stock market listings in the US, with over 60 so far and several large IPOs are likely to follow SpaceX. For example, other high-profile companies with AI-related business drivers, including OpenAI, which runs ChatGPT, and Anthropic, an AI company, are thought to be waiting in the wings.
 

Not all IPOs succeed​

Even in the buoyant markets of recent years, companies have debuted with high expectations, only to struggle as their competitive advantages have withered or other industries and products have taken the limelight. In recent years, and perhaps unsurprisingly, tech-orientated companies have tended to perform well since IPO, helped in part by recent tailwinds for the wider sector. For example, Arm is a large, well-established chip manufacturer, and has performed very well since its latest IPO. 

The company was UK-listed until it was taken private in 2016 by Japanese business SoftBank. It relisted on Nasdaq three years ago and has seen its shares jump over 400% since then, amid demand for AI-related products and semiconductors. In sharp contrast, Rivian, which is an electric vehicle manufacturer, has struggled. Its shares have fallen over 80% since its listing, amid production and pricing issues. 
 

Index inclusions and exclusions​

For investors in passive strategies, benchmark providers have to determine if IPO stocks will enter their indices. This is important as it establishes the positioning of many large investment funds. If a sizeable IPO is included in benchmarks provided by, for example, MSCI or S&P Dow Jones, then passive funds that are measured against these benchmarks have to buy into a stock in order to maintain their benchmark neutrality.

The rules for inclusion in indices differ by provider, for example due to stipulations about length of time as a public listing, and profitability and free-float requirements. SpaceX has been a loss-making company, and it is unusual for a company in this position to undertake an IPO, but it does show there was strong appetite in the market for this type of business, despite its relative immaturity. SpaceX was given initial inclusion in the Nasdaq, Russell and MSCI benchmarks, though not those of S&P Dow Jones. 

Whether passive funds end up holding this stock, initially depends on which index they track. SpaceX has a small free-float of around 5%, but as and when more shares come to the market, it will become a larger component of US and global indices and could build further market concentration in US technology-focused stocks, particularly in the AI-related segment (albeit, not all of this concentration is classified within the technology sector). If US-based OpenAI and Anthropic come to the market, this could further add to this skew. ​

Active managers also need to take a view if, in the SpaceX example, they decide to chase more AI and satellite communication exposure, whether there are better-priced opportunities elsewhere in the market, or if they would prefer their positions and exposures to be in other stocks and sectors entirely. ​
 

Watch this space​

The strong start for the SpaceX listing and the current flurry of IPO activity in the tech sector could be a sign of market confidence or overconfidence, and only time will tell. In our view, a solid diversification strategy, including a consideration of allocations to a mix of equity strategies and a range of geographies is perhaps appropriate in the current climate.​
 

Key takeaways

• A high-profile IPO can generate strong early momentum, but this does not guarantee sustained share-price performance.​
• Further big US IPOs could further skew the make up of key indices​
• Diversification across equity styles, sectors and geographies remains important