Strictly speaking, you are right, of course:
The evidence against buying hot IPOs on day one:
- IPO pop volatility: Hot IPOs often surge immediately due to scarcity and hype, then contract sharply within days or weeks once lockup periods end and the initial demand settles
- First-day premium: You're paying at the peak of excitement, not fundamental value. That "pop" is already priced in
- Information asymmetry: Institutional investors and insiders have better data than day-one retail buyers
- Lockup expiration: Existing shareholders (employees, VCs, founders) can sell after ~180 days, flooding supply
- Overpricing signal: Aggressive underpricing to generate hype (to boost trading volume and fees) is often a sign the company itself isn't compelling enough on fundamentals
The rare case where it might make sense:
- You're buying a fundamentally strong company you'd hold long-term anyway, treating the IPO event as incidental
- You have conviction about the underlying business, not the trading momentum
- You're dollar-cost averaging in rather than buying the full amount on day one
What research shows:
Studies on IPO returns generally find that investors who buy on the first day and hold tend to underperform the market. The best returns often go to those who buy 6-12 months after the IPO, once hype settles and fundamentals reassert.
The behavioral reality:
Day-one IPO buying is often driven by FOMO and media hype, not analysis. The people making money from hot IPOs are usually the underwriters and institutions with allocation priority, not retail day traders.
But my motivation here is slightly different. I want to gift a share each to kids (3), SIL/DIL (2) and grandkid (1, 7 months old). My goals are:
- Create a family tracking ritual: Quarterly email or Thanksgiving dinner check-in on SpaceX milestones—next Starship test, earnings, Starlink subscriber growth. Make them participants in watching the business, not just shareholders.
- Let them see volatility: the share price will swing. Use those swings to teach about market noise vs. business fundamentals. Teach them to ignore the noise and stay in for the long-haul. That's the real lesson.
Only the SIL is interested in investing and he is too faddish. You could argue that SpaceX is the ultimate fad, but their accomplishments are astonishing, doing what no other company has done (including the big Boeing flop that may cause them to exit space entirely). The fundamentals are sound and exciting.
My purchase falls 100% into the "Rare Case" described above. Company with strong fundamentals, conviction about the business, and dollar-cost averaging. One share to each kid/grandkid is really nothing more than a Day One memento, a "Grandpa was there and did this for me" keepsake.
I can buy on dips and gift them more shares.