Now the IPO market is heating up again. While 2026 will almost certainly not match the banner year of 1999, which saw 476 companies go public, investors should have far more choices than they did four years ago, when just 38 firms held an IPO. Those likely to debut this year include the giants SpaceX and OpenAI. 

“We’re going to see some companies go public that are going to be defining the American technology and economic landscape for the next decade,” says Matt Kennedy, senior strategist at Renaissance Capital. 

All of this is enticing for investors hoping to get in early on the next Microsoft or Google. But, as history shows, there is plenty to give pause to those looking to pounce on first-day share offerings.

More IPOs, more duds

Jay Ritter is a soft-spoken emeritus professor at the University of Florida who has acquired the nickname “Mr. IPO” for his exhaustive research on initial public offerings. His data shows that new offerings go on to beat the overall market in some years, but in other years the opposite is true—particularly in years that produce a bumper crop of IPOs.

While shares in Nvidia proved a winner, that wasn’t the case with the overall class of 1999 IPOs. That year, in fact, saw newly public companies deliver three-year returns of -48%. The number is especially sobering given that Ritter’s metric measures from the first-day closing price (which is almost always higher than the official offer price), and excludes nonconventional IPOs like reverse mergers.

For those tempted to dismiss this as ancient history—many members of the IPO class of 1999, after all, got clobbered by the dotcom crash—2021 provides another cautionary tale. That year saw a flood of 311 companies go public—the most in 20 years—but the three-year returns they collectively delivered came in at -49%. The reason for this is not particularly surprising. 

“When every IPO is popping, that’s when you see deals thrown together in a hurry,” says Kennedy, noting that smaller, unprofitable companies that would ordinarily not make the cut can pull off an IPO in such a climate. He adds that investors face a further challenge during IPO bull markets because even strong companies are prone to listing at hard-to-justify valuations, increasing the odds of a future slump. 

The upshot is that IPO boom times offer investors more opportunities, but also a lot more chances of a misstep. Meanwhile, companies that go public during lean years are more apt to be built to last.

Over the years, the path to going public has also shifted. According to Ritter, companies that debuted in the 1980s and 1990s were typically younger than today’s IPO entrants, but also more likely to be profitable. Surprisingly, though, Ritter says that profitability at the time of an IPO is not a big predictor of future success. He says that company sales are far better indicators, and firms that have $100 million or more in annual revenue are more likely to perform well over the long term than those that do not.

When to buy, what to expect

Any investor who has sought to purchase a newly listed stock has likely encountered a familiar frustration: Even if they seek to buy right when the stock lists, the price they see from their brokerage is higher than the official listing price. 

This occurs because the banks that underwrite the stock offer the listing price to large clients, leaving retail investors to scramble for shares on the open market. Those who want a better price can do so by getting in even earlier—via a private sale or during a company’s pre-IPO “road show”—but that’s easier said than done. 

According to Glen Anderson of Rainmaker Securities, which brokers private-share transactions, it’s possible to get hold of shares of firms like SpaceX or OpenAI, but it typically requires an investment of $250,000 or more. 

But for the vast majority of investors who will acquire shares on the open market, timing can still play a role. There is no upside to seeking to purchase a stock right when it lists, says Kennedy of Renaissance, adding that it can even be a good idea to buy it at the end of the day or on the day after the IPO. 

To get a true sense of a stock’s value typically requires waiting considerably longer for the dust to settle. Ritter makes the case that a newly public company’s first earnings report is not particularly helpful, noting that analysts and corporate executives are heavily invested in delivering results in line with expectations—meaning a firm will take any steps necessary to do so. He says a company’s true investment potential will become clearer after six months, which is when insiders are allowed to sell their shares—after which the share price will reflect the company’s fundamentals more than IPO hype. 

All this said, the next Nvidia is likely out there among this year’s IPO crop, and for those who want to try to buy it on its debut day, the best approach is still old-fashioned research, says Anderson. 

“You can press the buy button right at the opening for every new stock,” he says. “Or you can do the homework and see what a stock is really worth relative to its comps and valuation, and wait for the price you want. Otherwise, you are just rolling the dice.”

This article appears in the February/March 2026 issue of Fortune with the headline “IPO boom times are back—but be careful what you buy.”

Tech stocks plunged yesterday after President Trump announced in a “proclamation” that he was imposing a new 25% tariff on imports of computer chips from foreign countries. Every single one of the Magnificent Seven tech stocks was down by the closing bell yesterday. Meta suffered the worst, down 2.47%. Oracle (not in the Mag 7 but closely related) was down 4.29%, perhaps because it is the hyperscaler most dependent on imported chips for its AI data center business. 

The S&P 500 closed down 0.53%.

However, S&P futures this morning were up 0.36% prior to the opening bell. Traders may be buoyed by the fact that there is a rotation away from the Mag 7 going on among investors in S&P 500 stocks. The index was dragged down yesterday largely because the Mag 7 performed so poorly. But the notional “equal weight” S&P 500 actually rose 0.41%. It’s up 3.62% this year while the normal index is up only 1.18%.