IPOs Have Underperformed The Market For Years

The average three-year returns of IPOs have underperformed the broader market since 2018, with the performance gap exceeding 50% for IPOs from the 2020–2023 vintages. Over the longer term, IPOs have also delivered lower average returns than the market, outperforming in only 13 years since 1980. This pattern is consistent with the tendency for companies to go public during periods of elevated valuations and investor enthusiasm, followed by a reversion toward more normalized valuations as the initial hype fades. As we enter a new wave of IPO activity, with several technology and AI companies expected to go public this year and next, an important question is whether today's valuations are once again approaching a peak, and whether the subsequent returns will follow a similar pattern.