The IPO paradox: Why bigger isn’t always better

The recent performance of some of the world’s biggest initial public offerings (IPOs) raises an important question: are investors getting carried away by size and hype while overlooking fundamentals?

The world’s largest IPO — SpaceX’s $75-billion share sale — made a spectacular debut but has since slipped below its IPO price of $135. After surging to a high of $225.65 within days of listing, the stock has been on a steady decline, touching a low of $130.74 on Thursday. Whether it has found a bottom remains uncertain.

A similar pattern has emerged with SK Hynix, whose $26.5-billion Nasdaq listing became the largest-ever US IPO by a foreign company and the second-largest share sale on Wall Street after SpaceX. The stock, issued at $149 on July 9, climbed to $194.45 before retreating sharply. It was trading at $152.31, only marginally above its issue price.

Despite their massive valuations, these offerings had little difficulty attracting investors.

SpaceX reportedly received bids worth nearly $150 billion, driven largely by institutional investors. SK Hynix’s IPO, meanwhile, was subscribed more than seven times, reflecting strong investor appetite for one of the world’s leading memory-chip makers.

Until recently, mega IPOs were relatively rare. Before SpaceX, Saudi Aramco held the record with its $25.6-billion public issue. Investors who subscribed at the IPO price of 32 Saudi riyals are unlikely to be pleased today. The stock currently trades around SAR 26, well below its issue price, despite having touched a lifetime high of SAR 39.40.

The experience in India has been no different. Hyundai Motor India’s ₹27,870-crore IPO—the country’s largest to date—was priced at ₹1,960 a share. While the stock briefly rallied to ₹2,890, it has since settled around ₹2,000, leaving long-term investors with only modest gains.

The ₹21,008-crore IPO of Life Insurance Corporation of India has also delivered little by way of meaningful returns since listing. Paytm, whose ₹18,300-crore issue ranks among India’s biggest, continues to trade well below its IPO price of ₹2,150, eroding significant investor wealth.

And then there was Reliance Power’s blockbuster IPO in 2008. The less said about what followed, the better.

Of course, not every large IPO disappoints. Companies such as Meta (formerly Facebook), Visa and SoftBank have rewarded investors handsomely over the long term, underscoring that execution — not merely scale — ultimately determines success.

A successful IPO is only the beginning of a company’s journey. What matters far more is the quality of management and its ability to navigate economic cycles, technological disruption, rising competition and unforeseen crises. Strong leadership, disciplined capital allocation and consistent execution are what create lasting shareholder value.

For investors, the lesson is equally clear. IPO decisions should not be driven by the size of the issue or listing-day excitement. Valuation, corporate governance, cash-flow generation, competitive positioning and long-term growth prospects deserve far greater attention.

Companies, too, have a role to play. IPOs that are priced reasonably, leaving meaningful upside for investors while maintaining high standards of governance and transparency, are far more likely to build lasting trust than those that maximise valuations at the time of listing.

Ultimately, an IPO should mark the beginning of wealth creation — not merely the transfer of wealth from new investors to existing shareholders.